Driven by a global surge in semiconductor demand fueled by artificial intelligence and domestic corporate governance reforms, the Korea Composite Stock Price Index (KOSPI) has surged nearly 50% year-to-date, making it the world's best-performing major market and propelling the Korean stock exchange to become the ninth largest globally.
Data compiled by Bloomberg shows that as of February 25th, the total market capitalization of the Korean stock market has risen to $3.76 trillion, having increased by approximately $2.23 trillion since the start of the year, surpassing the French market's $3.69 trillion.
On February 26th, the KOSPI index rose a further 3.67% to close at 6,307.32 points, after hitting a new intraday record high of 6,313.27 points. The Korean market's successive overtaking of the French and German markets this year fully reflects a rapid re-rating by capital markets of its valuation logic. Year-to-date, the KOSPI has gained approximately 46%, while France's CAC 40 index has only risen about 4.5% over the same period.
In a report released on February 14th, Goldman Sachs stated that the US dollar-denominated MSCI Korea Index is leading gains in the Asia-Pacific market. Despite the sharp rally, Goldman Sachs did not recommend taking profits; instead, it raised its 12-month target for the KOSPI to 6,400 points.
The basis for this upward revision lies in the fact that the momentum of earnings recovery for Korean companies has far exceeded expectations, with the core driver being tightening supply of memory chips triggered by the capital expenditure expansion cycle of global tech giants. For investors focused on Asia-Pacific emerging markets, Goldman's view suggests that the strong uptrend in Korean stocks has not yet peaked, and the semiconductor industry chain's prosperity will remain a key theme for continuous market monitoring.
The fundamental force behind this sharp rally in the Korean stock market is a structural supply-demand imbalance in the semiconductor industry. SK Hynix's stock price has risen approximately six-fold since early 2025, while Samsung Electronics' stock price has nearly quadrupled.
Goldman Sachs noted in its report that capital expenditure from US cloud computing and hyperscale data centers continues to grow rapidly. Projected to reach $666 billion in 2026, this is a significant upward revision from the initial estimate of $548 billion at the start of the year. Meanwhile, the growth rate of memory chip supply has failed to keep pace with demand, leading to record supply shortages for both DRAM and NAND. This situation grants memory chip manufacturers strong pricing power and significantly boosts profits through high operational leverage.
Furthermore, SK Hynix is collaborating with SanDisk to advance the global standardization of High Bandwidth Flash (HBF). The two companies have established a working group under the Open Compute Project framework, with plans for commercialization by 2027. HBF achieves a balance of high bandwidth and large capacity by stacking NAND, is optimized for AI inference scenarios, and its long-term market size has the potential to surpass that of High Bandwidth Memory (HBM).
In its report, Goldman Sachs raised its 12-month target for the KOSPI to 6,400 points and maintained an overweight rating on the Korean stock market.
Analysts Timothy Moe and John Kwon outlined four key supporting rationales. First, earnings growth is exceptionally strong. Following 36% growth in 2025, Goldman Sachs forecasts 120% earnings per share growth for the Korean market in 2026 (compared to a market consensus of +115%). Notably, at the end of November 2025, the market's expectation for 2026 earnings growth was only +30%. Second, the technology hardware sector contributes the vast majority (approximately 88 percentage points) of the projected 2026 earnings growth, but other sectors like financials and autos are also contributing.
Third, valuations remain attractive. The KOSPI's 12-month forward price-to-earnings ratio remains below its historical average, providing a margin of safety for further gains. Fourth, policy and reform dividends continue to be released. Strong support for the stock market from President Yoon Suk Yeol and the advancement of corporate governance reforms, coupled with rising sentiment in the robotics industry boosting related stocks like Hyundai Motor, collectively form the institutional basis for the market's re-rating.
From a fund flow perspective, the week the report was released saw a significant divergence between foreign and institutional investors: foreign investors were net buyers of the KOSPI to the tune of approximately KRW 3.47 billion, while institutions were net buyers of about KRW 5.43 billion. In contrast, retail investors were significant net sellers, offloading approximately KRW 9.63 billion. Goldman Sachs data indicates that Korea's Equity Risk Barometer (ERB) has rebounded from deeply risk-averse territory to -0.7.
On the valuation front, despite the substantial rally, the KOSPI's 2026 expected price-to-earnings ratio remains at around 9 times, representing a significant discount compared to both the MSCI World Index and the MSCI Asia Pacific ex-Japan Index. Simultaneously, its alignment of Price-to-Book ratio and Return on Equity is among the more favorable in the Asia-Pacific region, providing relative valuation support for continued foreign capital inflows.
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