Key Takeaways
- • Goldman Sachs raised its 12-month KOSPI target from 8,000 to 9,000, calling South Korea its "highest conviction view" in Asia with an overweight rating, signaling continued upside despite the index's 77% year-to-date rally.
- • Global hedge funds recorded decade-high weekly buying in South Korean equities, reflecting institutional confidence in the market's continued momentum driven by AI-driven semiconductor demand.
- • Samsung Electronics and SK Hynix are powering the rally through a "perfect positive storm": record supply shortfalls in DRAM and NAND memory chips paired with strong hyperscaler demand for AI infrastructure, enabling Goldman to forecast 300% corporate earnings growth for South Korean hardware and semiconductor stocks in 2026.
- • South Korean stocks remain attractively valued relative to fundamentals despite the substantial rally, with Goldman noting the market may be "mispricing the durability of earnings" in memory semiconductors as supply constraints persist.
- • The Kospi closed above 7,400 after breaking through the psychological 7,000 level, positioning South Korea as one of the world's best-performing equity markets in 2026.
Summary
South Korea's equity market has emerged as the focal point of hedge fund and institutional investor attention in 2026, with Goldman Sachs recently doubling down on its conviction in the market's upside trajectory. The bank upgraded its benchmark KOSPI index target to 9,000 from 8,000, designating South Korea as its top regional market in Asia. At current trading levels around 7,400, this target implies approximately 22% additional appreciation from present levels.
The spectacular 77% year-to-date rally has been underpinned almost entirely by the semiconductor memory sector, where Samsung Electronics and SK Hynix—which recently crossed $1 trillion in market capitalization—dominate global supply chains. The two companies are benefiting from a structural supply-demand imbalance in both DRAM and NAND memory chips, the primary components driving AI server buildouts by hyperscale cloud providers. Record supply shortfalls combined with explosive demand growth from infrastructure investments in artificial intelligence have created the conditions for sustained pricing power and margin expansion across the sector.
Goldman's analysts argue that despite the market's robust performance, valuations remain defensible, with South Korean equities trading at modest multiples relative to their earnings trajectory. The bank explicitly projects 300% corporate earnings growth for hardware and semiconductor stocks in 2026, suggesting that the market may be underpricing the durability of elevated semiconductor profitability. Crucially, Goldman's revised outlook reflects confidence in the persistence of supply constraints rather than a cyclical peak.
Hedge fund positioning data reinforces this institutional conviction. Global hedge funds registered decade-high weekly buying volumes in South Korean equities, alongside elevated positions in Japanese and Taiwanese shares. This synchronized positioning in Asia reflects the sector-wide recognition that memory semiconductor allocations offer asymmetric risk-reward profiles in the context of sustained AI infrastructure spending globally. The combination of supply-constrained fundamentals, dominant market participants, and favorable valuation relative to forward earnings growth continues to attract significant capital inflows into South Korean equities.
The spectacular 77% year-to-date rally has been underpinned almost entirely by the semiconductor memory sector, where Samsung Electronics and SK Hynix—which recently crossed $1 trillion in market capitalization—dominate global supply chains. The two companies are benefiting from a structural supply-demand imbalance in both DRAM and NAND memory chips, the primary components driving AI server buildouts by hyperscale cloud providers. Record supply shortfalls combined with explosive demand growth from infrastructure investments in artificial intelligence have created the conditions for sustained pricing power and margin expansion across the sector.
Goldman's analysts argue that despite the market's robust performance, valuations remain defensible, with South Korean equities trading at modest multiples relative to their earnings trajectory. The bank explicitly projects 300% corporate earnings growth for hardware and semiconductor stocks in 2026, suggesting that the market may be underpricing the durability of elevated semiconductor profitability. Crucially, Goldman's revised outlook reflects confidence in the persistence of supply constraints rather than a cyclical peak.
Hedge fund positioning data reinforces this institutional conviction. Global hedge funds registered decade-high weekly buying volumes in South Korean equities, alongside elevated positions in Japanese and Taiwanese shares. This synchronized positioning in Asia reflects the sector-wide recognition that memory semiconductor allocations offer asymmetric risk-reward profiles in the context of sustained AI infrastructure spending globally. The combination of supply-constrained fundamentals, dominant market participants, and favorable valuation relative to forward earnings growth continues to attract significant capital inflows into South Korean equities.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.