Investing.com — South Korean equities remain attractively valued even after a powerful multi-year surge, with Macquarie arguing the rally is still fundamentally underpinned by earnings momentum and liquidity.
Analysts at the firm believe that Korea’s KOSPI stock market index could approach 8,000 in 2026, driven by “strong earnings growth, ample liquidity, and equity-friendly government policies.”
“The market, after a 160% rally since 2024, is still cheap,” analysts Daniel Kim and James Hong said in a note.
The analysts argue that the market’s valuations remain subdued relative to profit growth. Specifically, Macquarie estimates the market is trading around 9x 2026 earnings even as its Korea coverage universe is expected to deliver 114% EPS growth in 2026.
The pace of earnings upgrades has outstripped share price gains, meaning the rally has been “largely driven by underlying earnings growth rather than a re-rating,” the analysts said.
Memory chipmakers remain the central pillar of the bullish view. Macquarie expects Samsung Electronics (KS:005930) and SK Hynix (KS:000660) to account for roughly 52% of total net profits in 2026 and about 90% of the increase.
The analysts warned the industry is facing “the most severe memory supply crunch on record,” with no easing expected over the next two to three years as AI demand absorbs supply.
“As a result, we expect Korean corporate earnings momentum to remain strong into 2027E. Upside to memory prices is substantial, and we believe the market has yet to fully reflect this potential in current earnings forecasts,” the analysts said.
Beyond semiconductors, Macquarie also favors so-called neo-industrial exporters. Defence, shipbuilding and power equipment are seen in the early stages of long upcycles, supported by limited global competition and widening geopolitical divides that benefit Korean suppliers.
Policy and flows are also turning supportive, with Macquarie pointing to government efforts encouraging a rotation of household assets from property into equities, highlighting that Korean households hold about 65% of assets in property versus roughly 50% across the OECD.
Meanwhile, rising ETF inflows, increased share buybacks and the planned Reshoring Investment Account are expected to provide incremental demand for equities, the analysts said.
Macquarie maintains overweight positions in memory, defence, power equipment, bio/healthcare, shipbuilding, and K-beauty.
