After KOSPI's sharp drop, valuations reached crisis-era lows; Goldman sees risk indicators flipping to a contrarian bullish signal
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After KOSPI's sharp drop, valuations reached crisis-era lows; Goldman sees risk indicators flipping to a contrarian bullish signal
In its Korea weekly market report, Goldman states that KOSPI fell about 3.8%-4% over the week, foreign investors exited heavily and the technology sector was under pressure, yet earnings expectations were still revised up, the 12-month forward P/E is at an extremely low level, and a risk-aversion indicator is instead pointing to a more constructive subsequent return outlook.
- KOSPI fell about 3.8%-4% this week, MSCI Korea fell 5.5%, and technology, insurance, and retail were the weakest performers.
- The KOSPI 12-month forward P/E has fallen to the lowest level since the global financial crisis, and the report argues that even assuming a sharp earnings downgrades and valuations at a historical earnings trough, the index still has upside relative to current levels.
- Foreign investors had a net outflow from KOSPI of about KRW 19,874 billion, mainly driven by outflows concentrated in KOSPI technology stocks; institutional and retail investors, by contrast, showed net inflows.
- The 12-month forward EPS was revised up 4.8% this week, with the leisure sector seeing the strongest upward revision and chemicals seeing the most visible downward revision.
- The Korea equity risk barometer, GSSRKERB Index, fell to -1.5 and entered the risk-averse range; Goldman treats this as a contrarian signal after the market has experienced major volatility.
Report interpretation
Overview
This report is Goldman Sachs' weekly market tracking commentary on the Korean equity market, with the core theme being the “KOSPI Sell-off Pulse Check.” It discusses KOSPI's pullback amid persistent volatility, foreign capital outflows, and pressure on the technology sector, while using valuation, earnings revisions, flows, fx and rates, the risk barometer, and technical indicators to assess whether the market has moved into a more attractive risk-return area.
Core views
The central view is that although KOSPI has fallen sharply recently and broken below its 50-day moving average, with foreign investors still selling and market sentiment deteriorating, the 12-month forward P/E has already fallen to near-cycle lows since the global financial crisis, and earnings revisions remain positive across most industries. Goldman argues that in the context of a large prior drawdown, the Korea equity risk barometer entering a risk-averse zone has contrarian significance, implying that subsequent equity returns could become more constructive.
Analysis framework
The report uses a weekly market pulse-check framework and cross-checks index performance, sector relative performance, earnings revisions, valuation percentiles, foreign and domestic investor flows, FX and rates, commodity backdrop, the Korea equity risk barometer, RSI and trend indicators. Its focus is not on single-company fundamentals, but rather on risk-return assessment at the Korea equity market and KOSPI level.
Methodology notes
Measures KOSPI and sector valuations using 12-month forward P/E and P/B ratios, and compares them against historical ranges and global and regional markets.
The report emphasizes that KOSPI's 12-month forward P/E has fallen to the lowest level since the global financial crisis and highlights valuation discount versus MSCI AC World and MXAPJ.
Tracks upward and downward revisions to forward EPS forecasts for KOSPI and industry sectors.
The report notes that KOSPI's 12-month forward EPS was revised up 4.8% this week, and earnings upgrades covered most sectors.
Combines the Korea equity risk barometer, RSI, and moving averages to assess market risk appetite and technical market condition.
The GSSRKERB Index fell to -1.5 and moved into the risk-averse range, and RSI also fell to a low since late March 2026; the report treats this as a contrarian signal after a substantial market decline.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- KOSPICore coverage asset
- Strengths
- Valuation has fallen into an extremely low range, earnings revisions remain positive, and the risk barometer has moved into a contrarian bullish area.
- Weaknesses
- The index fell sharply this week, broke below the 50-day moving average, and foreign investors had large net outflows.
- Comparison
- There is a valuation discount relative to global and regional markets, and MSCI Korea declined more than some regional markets this week.
- Risks
- Potential continuation of foreign outflows, weakness in technology-heavy sectors, and the possibility that low valuation may persist.
- KOSPI Technology sectorMain drag
- Strengths
- Long-term earnings-revision data still show material EPS upgrades in the technology sector.
- Weaknesses
- One of the weakest relative performers this week, down about 7.6%, and a key contributor to foreign outflows.
- Comparison
- Significantly underperformed banks, securities, and leisure sectors, which were stronger this week.
- Risks
- If technology earnings upgrades fail to materialize, rebound potential at the index level would be constrained.
- Banking and Securities sectorsRelative strength this week
- Strengths
- Banking rose 13.7% and securities rose 10.2%, significantly outperforming KOSPI.
- Weaknesses
- The strength may be driven mainly by short-term rotation, and persistence still needs validation from flows and earnings momentum.
- Comparison
- Clearly outperformed technology, insurance, and retail.
- Risks
- Changes in rates, credit conditions, and market turnover could affect subsequent performance.
- KRWMacroeconomic and flow monitoring variable
- Strengths
- The won strengthened by 0.3% against the US dollar this week.
- Weaknesses
- It weakened by 0.2% against both JPY and EUR, so FX direction is not uniformly aligned.
- Comparison
- USDKRW, USDCNY, USDJPY are all included in regional FX tracking.
- Risks
- Fluctuations in the dollar, interest differentials, and foreign investor flows may continue to influence Korea asset pricing.
Key data
- KOSPI performance this week-3.8% to about -4%The report text says KOSPI fell 4%, while the summary table lists weekly KOSPI change as -3.8%.
- MSCI Korea performance this week-5.5%Korea underperformed relative to the broader regional market.
- KOSPI 2026E P/E6.3xValuation metric disclosed in the summary table.
- Current KOSPI level8088.34KOSPI level shown in the summary table.
- KOSPI foreign investor weekly flow-19,874 billion KRWNet outflow by foreign investors; the standard deviation measure is -3.1.
- KOSPI institutional investor weekly flow+8,159 billion KRWNet inflow from institutions.
- KOSPI retail investor weekly flow+11,121 billion KRWNet inflow from individual investors.
- 12-month forward EPS revision+4.8%The main text states KOSPI 12-month forward EPS was revised up this week.
- Korea Equity Risk Barometer-1.5Entered the risk-averse range and is viewed by the report as a contrarian indicator.
- USDKRW1531The won strengthened by 0.3% against the US dollar this week, while weakening by 0.2% against the yen and euro.
- Korea 3-year sovereign yield3.75%Up about 3 bps from one week ago.
- Korea 10-year sovereign yield4.20%Up about 8 bps from one week ago.
Impact & implications
If the report's assessment is correct, the recent KOSPI pullback may reflect sentiment, capital-flow, and technical pressure more than a broad deterioration in earnings trends. Low valuation combined with continued earnings revisions supports a medium-term rebound, but continued foreign outflows, technology sector weakness, and FX-rate and yield volatility may still drive near-term volatility. For investors, the focus should shift from simply avoiding declines to identifying valuation normalization, persistence of earnings revisions, and a turning point in flows.
Risks
- Further selling of KOSPI by foreign investors, especially in technology, could prolong market adjustment.
- KOSPI has fallen below its 50-day moving average, and the short-term technical setup remains weak.
- If future earnings revisions are reduced by an amount close to or greater than the report's scenario assumptions, the valuation cushion from low multiples could be weakened.
- Global market volatility, Meta-related headline shocks, FX and rate volatility may continue to affect Korean equity risk appetite.
- The report's risk barometer is a historical and contrarian indicator and does not guarantee future returns.
What to watch
- Whether weekly net buying/selling by foreign investors in KOSPI and the technology sector shows a turning point.
- Whether KOSPI 12-month forward EPS continues to be revised upward, especially in key sectors such as technology, leisure, chemicals, and retail.
- Whether KOSPI can reclaim its 50-day moving average, and whether RSI recovers from low levels.
- Whether the GSSRKERB Index remains in the risk-averse range, and whether its implied forward return probability is realized.
- How USDKRW, Korean sovereign yields, and regional equity performance affect Korea equity risk appetite.