Goldman Sachs Kospi target cut: Why South Korea market experts lowered target to 9,000 from 12,000 - Explained

After a series of upgrades, global brokerage firm Goldman Sachs has trimmed its 12-month target for South Korea’s KOSPI index to 9,000 points from 12,000, marking a 25% reduction. The brokerage cited concerns over the sustainability of the artificial intelligence (AI) trade and a sharp retreat in Korean chip stocks. Analysts, including Timothy Moe, lowered their 12-month target for South Korea’s benchmark equity index, adopting more conservative valuation assumptions after the benchmark plunged more than 35% from its June peak.

According to Bloomberg, the selloff has left Korean equities significantly undervalued, and the revised forecast still implies more than 60% upside from current levels. Goldman Sachs last raised its KOSPI target in June and maintained the 12,000-point forecast even as stocks in the index came under pressure during a global AI-led selloff that began later that month. AI-led rally in Korean chip stocks loses momentum

South Korean stocks, particularly SK Hynix and Samsung Electronics, have been among the market’s frontrunners since the beginning of 2026 as the AI theme gathered momentum. The rally propelled the KOSPI to gains of around 120% at its peak. However, the rally reversed sharply in the second half of the year as escalating tensions in the Middle East kept crude oil prices elevated, fuelling inflation concerns and prompting interest-rate hikes across major central banks.

Concerns over expensive valuations, questions about the returns on AI investments, and intensifying competition in the sector have also weakened investor enthusiasm for the AI trade.South Korea’s market valuations fall to multi-decade lowsSouth Korea has transformed from one of the year’s hottest major equity markets into one of the world’s cheapest, with valuations falling to roughly half those of Indonesia, according to Bloomberg.The KOSPI’s 12-month forward price-to-earnings (P/E) ratio has dropped to around four times, approximately three standard deviations below its historical average.

Among the 18 markets tracked by Bloomberg, valuations were last this low in 2006.The Goldman Sachs strategists estimate that current semiconductor valuations imply a 65% decline in the sector’s earnings in 2027, a scenario they consider excessively pessimistic. Stocks outside the memory sector, which account for about half of the index, are trading at 7.6 times forward earnings.Goldman Sachs remains selective on opportunitiesDespite the target cut, Goldman Sachs continues to favour opportunities in power, industrials, corporate governance-related stocks, and companies benefiting from domestic reflation and the popularity of Korean culture.The brokerage’s latest move signals a more selective approach as concerns over the sustainability of the AI trade and slowing earnings momentum weigh on markets.The brokerage also lowered its target for the regional MXAPJ index to 1,040 from 1,120, reflecting more conservative assumptions amid rising market volatility and slowing earnings momentum.The bank also revised its 55-stock Asia strategy portfolio for the fourth quarter of 2026, signalling a shift away from a broadly bullish stance towards more selective stock picking as the AI trade loses momentum.(With inputs from Bloomberg)Disclaimer: We advise investors to check with certified experts before making any investment decisions.