Goldman Sachs has maintained its bullish call on South Korean equities, keeping its KOSPI target at 12,000. The brokerage said the market is underestimating how long the earnings cycle at Korean memory chipmakers will last, as widening investment in artificial intelligence data centers deepens a shortage of memory chips.
Timothy Moe, Goldman Sachs' chief Asia-Pacific equity strategist, said in an interview on the 4th that he was keeping his KOSPI target at 12,000 points, Bloomberg reported on the 7th.
"The market is underestimating the duration of this earnings cycle," he said, adding that profits would support further gains in the index.
Moe raised his KOSPI target to 12,000 points from 9,000 in early June. Early last month, he also kept the target unchanged, describing June's decline as a sharp correction within a broader bull market.
Behind the bullish view are earnings at memory chipmakers, which account for a large share of South Korea's stock market.
Moe said the memory shortage driven by competition in data center investment would intensify further next year. He estimated that capital spending by U.S. big tech companies would rise to $1.2 trillion next year, up from an earlier forecast of $800 billion.
"Hyperscalers have to keep spending even if they don't make money," he said. "That's good for memory, because it will drive computing demand that requires a great deal of memory."
Goldman Sachs estimates earnings growth at KOSPI-listed companies at about 360% this year, slowing to 35% next year.
Low valuations also underpin room for further gains. The 12,000-point target implies a price-to-earnings ratio of 7.5 times 12-month forward earnings. The KOSPI currently trades at about 5.3 times, roughly half its average over the past seven years.
Moe said the 12,000-point target would "not look ridiculous" if Korean companies deliver the earnings Goldman Sachs is forecasting.
He flagged the growth of rivals such as China's ChangXin Memory Technologies (CXMT) and the possibility of political pushback against data center construction in the U.S. as variables.
