SEOUL — Global investment bank Goldman Sachs has reaffirmed its "Overweight" rating on the South Korean stock market and maintained its 12-month target for the benchmark KOSPI index at 12,000, despite recent sharp market declines. This target represents an estimated potential upside of approximately 92% from current price levels.

In a report published on August 4, a team led by Goldman Sachs Chief Asia-Pacific Regional Equity Strategist Timothy Moe noted that "the market is pricing in a far more negative outlook than actual fundamentals warrant."

The KOSPI surged 116% year-to-date to reach an all-time high of 9,114.55 on June 22, before experiencing a steep 39% pullback through July 30. The index has since seen heightened volatility, including an 18% single-day rebound on July 31.

Goldman Sachs identified several key drivers behind the recent sell-off, including:

-Concerns over the memory chip cycle duration
-Forced liquidations in leveraged ETFs
-Outflows from short-term momentum investors
-Technical corrections following short-term market overheating

However, the investment bank emphasized that the strength and longevity of the memory cycle remain intact, supported by expanding compute demand and a structural supply deficit expected to persist through 2030. Goldman Sachs pointed out that the pricing power and profitability stemming from these fundamentals are not yet reflected in current stock valuations.

On market positioning, the report highlighted improvements following a reduction in leveraged ETF net assets and a unwind of margin debt. Additional positive drivers cited include solid earnings growth in non-memory sectors—which account for 40% to 50% of the KOSPI's market capitalization—attractive valuations, and ongoing progress in corporate governance reforms.

Goldman Sachs projects KOSPI corporate earnings growth of 320% in 2026, 35% in 2027, and 20% in 2028. The benchmark index is currently trading at a price-to-earnings (P/E) ratio of 5.1x, while reaching the 12,000 target would require a P/E multiple expansion to 7.8x.

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