MW South Korea's wild week ends on a flat note. Here's what Goldman Sachs expects next.
By Jules Rimmer
This week's volatility needs to be viewed in the context of a 176% rally since last April, say strategists.
South Korea experinced a 20% fall over two days then a 10% rebound before closing the week with a flat finish.
After two days of double-digit declines and then a 10% rebound on Thursday, investors in the South Korean equity market would have been relieved with Friday's flat finish.
Despite the wild volatility, the benchmark KOSPI KR:180721 index is still showing a 32% return for 2026 so far and Goldman Sachs is telling investors there's another 25% upside to their new target of 7,000 this year, up from 6,400 previously.
The Goldman note published Friday by its portfolio strategy team, led by Tim Moe, reminds investors to put this week's rollercoaster ride in perspective. The market has delivered a 176% return since last April and so while a cumulative drop of 20% Tuesday and Wednesday met the technical criterion for a bear market, Moe insists the longer uptrend remains intact and this week represents just an "overdue correction."
The iShares MSCI South Korea ETF EWY has dropped 17% this week but is still up 23% on the year.
KOSPI's 20% correction from its recent high should be viewed in the context of the exceptionally strong gains seen over the past quarter and year
Historical analysis demonstrates to Moe that the index tends to recover well from deep, single-day declines, prompted by spikes in geopolitical risk, on a 3-, 6- and 12-month basis. Moreover, Korea also habitually recovers from steep corrections in global markets, particularly if there is no U.S. recession.
The South Korean market rally has been fueled in large part by the frenzied speculative activity of retail investors but the Goldman note points out that positioning is less extended than many observers assume.
First, international investors have sold $15 billion of equities so far in 2026. Second, retail investors had been net sellers throughout 2025 and January 2026, only reversing to net buyers in February. Third, market ownership by domestic institutions is below its historical norms.
However, it isn't just technicals that are driving the call from Moe. He's revising upwards his market earnings growth forecast from 120% to 130% and this is the third time in 2026 alone. Moe has been obliged to increase his estimates given the strength of demand the semiconductor companies like Samsung Electronics (KR:005930) and SK Hynix (KR:000660) are experiencing. The industry has high operating leverage so sharply increasing memory prices benefit the bottom line rapidly.
We raise 2026 earnings growth forecast to +130% on continued strength in the semiconductor industry
Despite the outsized index gains of what has been the world's best performing stock market, valuations remain attractive, according to Moe. Price-to-earnings multiples for 2026 and 2027 are 8.8 times and 7.8 times, a significant discount to emerging markets EEM as a whole. Even removing the two index heavyweights, Samsung and SK Hynix, that multiple is still only 12.9 times and the market's estimated return on equity is an impressive 20% for this year.
Moe is one of many analysts at present pointing out the progress made on corporate governance reform which has improved shareholders returns and narrowed the discounts on conglomerate or chaebol shares.
The most appealing sectors according to Goldman Sachs stretch beyond semiconductors to AI-related themes like robotics, to power plays, industrial and defense stocks, shipbuilders and consumer stocks benefiting from the K-culture trend.
-Jules Rimmer
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(END) Dow Jones Newswires
March 06, 2026 05:20 ET (10:20 GMT)
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