Korea’s red-hot Kospi stock rally still has room to run, Goldman Sachs

South Korea’s blistering stock-market rally has been rocked by wild swings in recent weeks, but Goldman Sachs says the recent turmoil hasn’t changed its bullish outlook.

South Korea was Asia’s best-performing equity market in the first half of 2026, with the benchmark Kospi index nearly doubling. But that rally came under pressure recently, with sharp swings in chip stocks triggering circuit breakers and testing investor appetite.

On Monday, the Kospi opened higher before reversing course to trade 2.1% lower by 12:56 a.m. ET.

Despite concerns about concentration risk — as AI-driven gains in Samsung Electronics and SK Hynix drove most of the market’s gain — Goldman expects the rally to broaden beyond the AI memory-chip trade in the second half.

“Earnings momentum is increasingly improving across other sectors,” wrote analysts at Goldman in a note on Sunday, pointing to energy, materials and industrials.

The shift is showing up in investor positioning.

“Incremental foreign inflows have already begun rotating toward other AI-related beneficiaries and industrials, and we expect this trend to continue as investors seek exposure to the broader AI supply chain and opportunities that are uncorrelated with AI,” the analysts wrote.

Despite concerns that the rally has become speculative, Goldman said retail positioning does not resemble that of an overheated market.

“Retail activity has risen, but investor exposure remains well below levels typically associated with market excess,” they wrote.

The bank also said headline margin-loan figures overstate investor risk because much of the growth in leveraged ETF assets reflects rising share prices rather than fresh borrowing.

Domestic households have also yet to go all-in on Korean stocks, Goldman added.

“Korean households continue to maintain property-skewed portfolios rather than exhibiting all-in positioning toward domestic equities,” they wrote.

Because households remain heavily invested in real estate, cash and overseas equities — particularly US stocks — domestic investors still have significant capacity to increase allocations to Korean shares if market conditions remain favorable, the analysts wrote.

The bank expects exceptionally strong earnings growth to continue, forecasting profits to rise 320% this year and another 35% in 2027. Valuations outside Samsung Electronics and SK Hynix remain reasonable relative to regional peers, Goldman said.

Goldman expects the Kospi to reach 12,000 over the next 12 months, implying more than 20% upside from current levels, while cautioning that the rally is likely to take a “bumpy path.”