Fueled by the surge in AI demand and the supercycle in memory chips, JPMorgan Chase has once again significantly raised its target for South Korea's Kospi index, this time just a month after its last revision, setting a high-end target of 15,000 points, which underscores Wall Street's robustly optimistic sentiment toward this market.
In a report released on Thursday, June 25th, the bank increased its base case target price for the Kospi index from 10,000 points in May to 12,500 points. It also established a bullish scenario target of 15,000 points and a bearish scenario target of 8,000 points. The bank continues to rank South Korea as its top stock market pick in Asia, advising investors to increase their exposure during market pullbacks and to maintain their maximum allocation to the Korean market.
This adjustment continues the bank's recent series of bullish moves. Previously, in a span of less than a month, JPMorgan had already conducted its second upward revision, raising its base case target to 9,000 points and its bullish target to 10,000 points. Now, another month later, with the Kospi index recently surpassing the 9,000-point threshold, JPMorgan has once again updated its forecasts.
Despite pressures from foreign selling and heightened market volatility, JPMorgan's strategists clearly stated that AI-driven earnings growth will offset these negative factors. This stance not only reinforces market confidence in the profitability of South Korean tech stocks but also directly reflects the ongoing global capital chase for core assets within the AI supply chain.
Broad-Based Optimism Among Major Brokers
JPMorgan is not alone in its positive outlook. Goldman Sachs recently raised its Kospi target to 12,000 points, and Morgan Stanley increased its target to 10,500 points. Major foreign securities firms widely agree that South Korea's AI-related profit momentum remains a key driver for further stock market gains.
AI Chip Profits and Memory Cycle Drive the Bull Case
The core rationale behind JPMorgan's latest upgrade is that the profit scale of South Korean memory chip companies is now substantial enough to have a systemic impact on the macroeconomy.
JPMorgan pointed out that the profits of AI-related chip manufacturers are now large enough to influence corporate income tax revenue, household wealth, and even government tax income. Consequently, South Korea has become one of the most direct equity market beneficiaries of the global AI cycle.
The bank maintains its view of a memory chip cycle that will "stay higher for longer," believing that the earnings of South Korean tech firms are highly sensitive to AI data center spending, with existing pricing power supporting this assessment.
The trajectory of JPMorgan's target revisions this year has been rapid: at the end of April, it initially set a base case target of 7,000 points and a bullish target of 8,500 points. In less than a month, by mid-May, it raised the base case to 10,000 points and the bullish target to 10,000 points. The latest move further lifts the base case to 12,500 points, the bullish target to 15,000 points, and sets a bearish target of 8,000 points.
Structural Pressures: Foreign Selling and Leveraged ETFs
Despite the clear bullish fundamental logic, JPMorgan also cautioned about structural pressures facing the market.
The bank estimates that foreign investors have sold approximately $95 billion worth of South Korean stocks this year, with over 90% of that outflow concentrated in the two major memory chip stocks. Due to the outsized market capitalization of these two stocks, some emerging market investors have reached their mandated allocation limits, forcing them to continuously reduce positions during rallies.
Simultaneously, the size of leveraged ETFs linked to South Korean stocks has grown to around $50 billion. These products amplify price volatility through activities in futures, options, and spot markets, driving a significant increase in implied volatility. JPMorgan noted that this market structure feature is intensifying short-term index fluctuations.
The pressure from foreign selling has also transmitted to the currency level, putting downward pressure on the South Korean won. However, JPMorgan suggested that potential interest rate hikes by the Bank of Korea and seasonal tax-related fund flows in August could provide some support for the won.
Domestic Investors as a Counterbalancing Force
Against the backdrop of persistent foreign outflows, South Korean domestic investors have emerged as a crucial source of buying support. JPMorgan estimates that South Korean individual investors have purchased approximately $80 billion worth of local stocks this year, including ETF inflows.
The bank believes retail demand is likely to persist, as households are repatriating funds from overseas stock investments and domestic real estate investment channels remain constrained, making the stock market relatively more attractive for retail capital.
This internal capital rotation has, to some extent, offset the impact of foreign outflows and serves as one of the structural supports underpinning JPMorgan's maintained bullish stance.
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