According to BlockBeats, on July 6th, Goldman Sachs released its second-half strategy framework for the South Korean stock market, maintaining its 12-month target of 12,000 points for the KOSPI index, representing over 20% upside from current levels. The core support comes from a projected 320% year-on-year earnings growth and a forward P/E ratio of only 6.65. This indicator is 2.7 standard deviations below its historical average, the lowest since 2009.
South Korean stocks led Asia with a 92% gain in the first half of the year, but the gains were primarily driven by upward revisions in earnings rather than valuation expansion: forward EPS was revised upward by nearly 200%, while forward P/E ratios actually compressed slightly; Samsung Electronics and SK Hynix contributed nearly 90% to the index's gains, with their combined market capitalization weighting rising to 56% and their earnings weighting reaching 72%. Goldman Sachs believes this concentration reflects earnings more accurately than a bubble, but market breadth has fallen to its lowest level since the pandemic, and volatility will intensify if the market continues to rise in the second half of the year.
In response to retail investors' concerns about risk, Goldman Sachs pointed out that leverage levels are overestimated. The growth in the size of leveraged ETFs mainly comes from asset appreciation rather than new leveraged funds. The margin loan-to-deposit ratio is actually declining, and retail investors still hold a large amount of cash buffer and their asset allocation is still mainly in real estate.
Goldman Sachs believes that opportunities in the South Korean stock market in the second half of the year will spread from memory chips to six main themes: industrial sector (accelerated defense orders, VLCC replacement demand to be released), robotics and physical AI (South Korean auto parts ecosystem is expected to become a core supplier of humanoid robots), batteries and power infrastructure (driven by data center energy storage demand), beneficiaries of corporate governance reforms (multiple regulations were implemented intensively from July, with more than 70% of listed companies having a PBR of less than 1), reflation trades (semiconductor profit spillover effect drives GDP upward revision and prolongs the interest rate hike cycle), and the semiconductor capital expenditure supply chain (the government plans to invest 800 trillion won in the "three super projects").
Goldman Sachs also highlighted three risks: seasonal weakness in the third quarter, technical correction pressure from a significant deviation of the index from the moving average, and amplified volatility due to hedging operations by leveraged ETF market makers. The combination of earnings growth and low valuations makes South Korea the market with the lowest PEG ratio in Asia, and the current valuation misalignment provides significant opportunities for stock selection in the second half of the year.