The hottest stock market in the world has doubled this year. And Goldman Sachs sees another 40% gain from here.

By Jules Rimmer

Goldman raises its target for South Korea's Kospi index from 7,000 to 12,000

Currency dealers celebrating South Korea's benchmark stock index breaking the 6,000 level back in February. Goldman Sachs says the market could double that.

Back at the start of March, with the Iran crisis in its early days, the 7,000 target for South Korea's Kospi index set by Goldman Sachs was looking ambitious.

Fast forward three months, however, and that objective has been comfortably exceeded, and Goldman's chief portfolio strategist for Asia, Tim Moe, has now boosted his Kospi KR:180721 target to 12,000, almost 40% above Wednesday's close of 8,801. His recommendation for the market remains at overweight.

The driving force behind Moe's massive target increase is the spectacular earnings growth enjoyed by South Korean companies, especially the two heavyweight memory-chip makers, Samsung Electronics (KR:005930) and SK Hynix (KR:000660), that between them constitute almost half of the index.

Index gains in Korea and Taiwan are powered by revisions to consensus growth expectations.

Their earnings prospects show no signs of slowing and in fact were further enhanced by comments made by Nvidia's (NVDA) chief executive, Jensen Huang, who was attending a tech conference in Taipei on Tuesday. Huang, whose company buys most of the high-bandwidth memory chips from Samsung and SK Hynix, requested that the latter "Please Make More" while expressing enthusiasm for the product.

This relentless demand has been behind the dramatic earnings revisions, outlined by Moe in a report he and his Asian strategy team published Wednesday. At the start of 2026, consensus earnings-per-share growth for the South Korean market was a pretty decent 48%. Now that figure is 277%.

Moe is lifting his estimates for 2026 earnings growth to 320% from 300%, and he also boosted his 2027 earnings-growth view to 35% from 28%. The strength of earnings is such that, even if Kospi were to achieve 12,000, the market would still only be trading on eight times forward earnings.

Moe points out that since "the demand for compute is growing faster than supply can respond, the market continues to underprice the likely duration of the semiconductor memory cycle." That South Korea currently commands only five times forward earnings suggests the market is skeptical of the longevity of this supply-demand dynamic, Moe contends.

Moe still thinks the market is underestimating how long the supply-demand mismatch in memory chips can persist.

The market, therefore, Moe argues, remains undervalued with potential catalysts to rerate further if continued progress is made on Korea's "Value-Up" program, a government-led initiative to raise governance standards and protect minority shareholders.

Looking for historical evidence to support his bullish outlook, Moe draws on Korea's experience of dealing with earnings cyclicality in the past and finds that the median valuation during market peaks was a price-to-earnings ratio of 10, versus the present 8.2 times earnings, and the median valuation during market troughs was 11.4 times. Moe calculates that even if Kospi were to succumb to a tactical correction, it probably only has downside to around 7,800.

While the index's 127% year-to-date return has been setting the pace for stock markets globally, Taiwan, another market with highly significant exposure to the AI theme, has performed extremely well, too. Moe assesses 85% of the Taiwanese TWSE benchmark TW:Y9999 is exposed to AI, and this explains why he and his team upped their EPS growth forecasts to 48% in 2026 (from 45%) and 30% in 2027 (from 28%). The AI boom has benefited its largest stock, Taiwan Semiconductor Manufacturing Co. (TSM), most of all. As a consequence, Goldman now has an index target of 51,000 for the TWSE, 12% above present levels, justifying an upgrade in its recommendation to overweight.

The most liquid exchange-traded fund for Taiwan EWT was down 0.14% early Wednesday, while Korea's EWY was down 0.85%. The U.S. benchmark S&P 500 SPX was down 0.34%.

-Jules Rimmer

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06-03-26 1040ET