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A Goldman Sachs Group strategist remains bullish for on South Korean shares, saying investors are underestimating how long the AI boost for the country's chipmakers will last.
Timothy Moe, the investment bank's chief Asia Pacific equity strategist, has maintained his target of 12,000 for the benchmark index Kospi, indicating an upside of close to 80% from the present level. His estimate, which was set three months ago, was one of the most bullish targets on the street.
Moe, in an interview on Friday, said he is still holding on to the target and that it is driven by what he thinks will be earnings delivery. He said the market is underpricing the duration of the current earnings cycle.
His optimism belies the 27% plunge in the Kospi index since June's record high on concerns regarding the sustainability of Big Tech's AI spending boom and an increase in Korean stock volatility. Meanwhile, another round of stellar earnings from chipmakers SK Hynix Inc and Samsung Electronics Co has done little to boost shares.
However, the global race to build data centres has led to massive shortages of memory and storage chips, increasing their prices, which Moe expects will only intensify next year. US Big Tech Spending is expected to top $1.2 trillion in 2027, sharply higher from previous forecasts of $800 billion, Moe said.
He added that the hyperscalers would continue to spend even if they don't earn money. It is great for memory as it will drive compute demand, which is very memory intensive, he said.
Moe estimates earnings growth of around 360% this year for Kospi members, which is likely to moderate to around 35% in 2027. He said the fact that profits will eventually start to slow down is already well-understood by the market.
He also acknowledged the risks from Chinese competitors such as CXMT Corp and the potential political pushback against the US data centre buildout. But he said the fundamentals still favour advanced memory chipmakers for the next few years.
Moe said his Kospi target is based on 7.5 times forward results estimates. Kospit currently trades at 5.3 times, around half its seven-year average
If Korean firms achieve his earnings estimates, then Moe said his Kospi estimate is not as crazy as it might appear.
With inputs from Bloomberg
Also Read: Record Date Alert: These companies will trade ex-dividend, adjusted for demerger this week
Timothy Moe, the investment bank's chief Asia Pacific equity strategist, has maintained his target of 12,000 for the benchmark index Kospi, indicating an upside of close to 80% from the present level. His estimate, which was set three months ago, was one of the most bullish targets on the street.
Moe, in an interview on Friday, said he is still holding on to the target and that it is driven by what he thinks will be earnings delivery. He said the market is underpricing the duration of the current earnings cycle.
His optimism belies the 27% plunge in the Kospi index since June's record high on concerns regarding the sustainability of Big Tech's AI spending boom and an increase in Korean stock volatility. Meanwhile, another round of stellar earnings from chipmakers SK Hynix Inc and Samsung Electronics Co has done little to boost shares.
However, the global race to build data centres has led to massive shortages of memory and storage chips, increasing their prices, which Moe expects will only intensify next year. US Big Tech Spending is expected to top $1.2 trillion in 2027, sharply higher from previous forecasts of $800 billion, Moe said.
He added that the hyperscalers would continue to spend even if they don't earn money. It is great for memory as it will drive compute demand, which is very memory intensive, he said.
Moe estimates earnings growth of around 360% this year for Kospi members, which is likely to moderate to around 35% in 2027. He said the fact that profits will eventually start to slow down is already well-understood by the market.
He also acknowledged the risks from Chinese competitors such as CXMT Corp and the potential political pushback against the US data centre buildout. But he said the fundamentals still favour advanced memory chipmakers for the next few years.
Moe said his Kospi target is based on 7.5 times forward results estimates. Kospit currently trades at 5.3 times, around half its seven-year average
If Korean firms achieve his earnings estimates, then Moe said his Kospi estimate is not as crazy as it might appear.
With inputs from Bloomberg
Also Read: Record Date Alert: These companies will trade ex-dividend, adjusted for demerger this week
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