Goldman Sachs raises its 12-month KOSPI target to 8,000 and maintains an overweight on the Korean market

Overview

This report is Goldman Sachs' weekly strategy update on the Korean market, with the core conclusion of raising the 12-month KOSPI target to 8,000 while maintaining an overweight allocation to Korea within regional markets. The report attributes this upward revision to continued fundamental improvement in the semiconductor and industrial sectors, large upward revisions to 2026 earnings forecasts, valuations that remain at historically low levels, corporate governance reforms and improved shareholder returns that are not yet fully priced in, and room for a recovery from underweight foreign positioning.

Core views

The report argues that the upside case for the Korean market does not rely solely on semiconductors. Although earnings improvement driven by AI-related semiconductor demand is very strong, expected 2026 earnings growth for the Korean market still reaches 48% excluding Samsung and Hynix, showing that the earnings upgrade has a certain breadth. After KOSPI's 5.7% gain this week, its 12-month forward P/E remains around 7.5x, at roughly -2.1 standard deviations, indicating that valuations are still deeply compressed. Goldman Sachs believes that with solid fundamentals, low valuations, and light positioning working together, the Korean market still has strong upside potential.

Analysis framework

The report uses a top-down regional allocation and index target framework, combining earnings forecasts, forward P/E, historical valuation ranges, foreign flows, mutual fund allocations, exchange rates, risk indicators, and progress in corporate governance reform to assess KOSPI's risk-reward profile. The KOSPI 8,000 target is based on 8.1x forward P/E and is compared with the historical median valuation of about 10x at past market peaks; the report also runs a downside scenario assuming a 33% earnings cut and an 11x valuation, implying KOSPI at around 6,250, to show that downside appears relatively limited.

Methodology notes

• equity_strategy12-month index target framework

  12-month index target

  Derives KOSPI's target level over the next 12 months through earnings forecasts, forward P/E multiples, and historical valuation percentiles.

• Valuation methodsforward P/E z-score

  Forward P/E standard deviation valuation

  The report uses the standard deviation position of KOSPI's 12-month forward P/E relative to its historical average to measure valuation compression; the current level is about 7.5x, corresponding to roughly -2.1 standard deviations.

• fund_flowforeign ownership and mutual fund allocation

  Foreign holdings and mutual fund allocation

  Assesses whether there is room for position rebuilding through foreign net flows, foreign ownership in the semiconductor sector, and Korea's allocation in EM, AEJ, and global mutual funds.

• governancecorporate governance reform pulse check

  Corporate governance reform watch

  The report tracks shareholder engagement, shareholder returns, buybacks, improvements among low-PBR companies, and changes in capital allocation, and believes governance reform can still contribute to valuation re-rating.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KOSPI

  Core covered asset and target index

  Strengths

  Earnings forecasts have been significantly revised up, valuation is at historically low levels, and Goldman Sachs maintains an overweight on Korea while raising the 12-month target to 8,000.

  Weaknesses

  The market has already rebounded recently and remains affected by foreign flows, exchange rates, and global risk appetite.

  Comparison

  It still trades at a valuation discount relative to regional and global markets; Korea's allocation in EM, AEJ, and global mutual funds remains low.

  Risks

  Earnings downgrades, renewed foreign selling, slower-than-expected delivery of governance reform, and macro or geopolitical shocks.

• Korean semiconductor sector

  A key driver of earnings upgrades and recovery in foreign positioning

  Strengths

  AI-related demand is driving earnings improvement, and foreign holdings are relatively light after previous outflows.

  Weaknesses

  The market remains highly reliant on semiconductor earnings improvement; if the cycle or AI demand expectations cool, index upside may weaken.

  Comparison

  The report says semiconductor improvement is very pronounced, but the Korean market still has 48% earnings growth in 2026 excluding Samsung and Hynix.

  Risks

  Downward revisions to semiconductor earnings expectations, continued foreign selling, and valuation volatility in global tech stocks.

• KRW

  An important variable for market sentiment and foreign investor returns

  Strengths

  It strengthened 0.1% against USD this week, supporting Korean asset performance.

  Weaknesses

  It depreciated 0.4% against EUR, and exchange-rate direction may still be volatile.

  Comparison

  The report also focuses on the impact of USDKRW, USDCNY, interest rates, and commodities on the Korean market.

  Risks

  A stronger USD, weaker global risk appetite, and Korean macro data missing expectations.

• Korean low-PBR and governance reform beneficiary companies

  Potential re-rating opportunities

  Strengths

  The report notes that about 70% of stocks trade below book value, and corporate governance reform plus improved shareholder returns could drive valuation re-rating.

  Weaknesses

  Reforms are mostly gradual, companies only partially meet investor expectations, and substantive results may come later.

  Comparison

  The report focuses on undervalued preferred shares, holding companies with deep NAV discounts, low-PBR companies with improving shareholder returns, and companies with improving capital allocation.

  Risks

  Slower reform progress, shareholder returns below expectations, and low valuations persisting for a long time.

Key data

• KOSPI weekly gain+5.7% wowThe rise was supported by expectations for US-Iran peace talks, KRW strength, and the strong Korean market.
• KOSPI 12-month target8,000The previous target was 7,000; the current index is around 6,192, implying a 29% price return.
• Expected total USD return33%Korea is rated overweight in Goldman Sachs' regional allocation table.
• 2026 forecast for overall Korea earnings growth220%One of the main drivers behind the target increase.
• 2026 earnings growth excluding Samsung and Hynix+48%Shows that the earnings upgrade is not entirely driven by the two largest semiconductor companies.
• KOSPI 12-month forward P/Eabout 7.5xAs of April 17, 2026, it was about 7.51x, at roughly -2.1 standard deviations.
• Korea equity risk barometer-0.1The GSSRKERB Index has rebounded into the risk-neutral zone.
• Weekly change in KRW versus USD+0.1%KRW strengthened 0.1% against USD, rose slightly against JPY, and depreciated 0.4% against EUR.

Impact & implications

The report's investment implication for Korean equities is positive: earnings upgrades raise the base for the index target, low valuation provides room for re-rating, underweight foreign positioning and light semiconductor holdings offer elasticity for capital inflows, and corporate governance reform and better shareholder returns may help narrow the long-term valuation discount. If these factors play out, KOSPI could move toward the 8,000 target; however, if earnings are sharply revised down, foreign outflows continue, or governance reform progresses more slowly than expected, the upside path could be hindered.

Risks

• A sharp downward revision to 2026 earnings forecasts would weaken the basis for raising the KOSPI target.
• If foreign investors turn to heavy selling again, expected inflows from the recovery of underweight positioning could be offset.
• If corporate governance reform and shareholder return improvements continue to be gradual, valuation re-rating may be delayed.
• If semiconductor earnings improvement falls short of expectations, the Korean market's main upside driver could be affected.
• Changes in exchange rates, interest rates, geopolitics, and global risk appetite may affect KOSPI performance.

What to watch

• Whether KOSPI 2026 earnings forecasts continue to be revised upward, especially in semiconductors and industrials.
• Whether earnings growth excluding Samsung and Hynix can maintain breadth.
• Whether KOSPI's 12-month forward P/E can recover from the low level of about 7.5x toward its historical average.
• Net foreign flows into KOSPI and the semiconductor sector, and changes in holdings.
• Whether Korea's allocation in EM, AEJ, and global mutual funds rebounds from underweight levels.
• Actual progress in Korean corporate governance reform, buybacks, dividends, and improved capital allocation.
• The trend of KRW against USD and changes in Korea's risk indicator, the GSSRKERB Index.