Citi has increased its year‑end target for South Korea’s KOSPI index to 10,000 points, up from the previous 8,500‑point target. The new level is derived from a valuation of 2.3 times book value per share, which translates to an implied price‑to‑earnings multiple of 9.5×, slightly below the 20‑year historical average of the 12‑month forward EPS.
The brokerage now expects South Korea’s FY26 net profit to expand by 231% year‑on‑year, a revision upward from an earlier estimate of 177% YoY based on the Quantiwise consensus. This acceleration is attributed to semiconductor‑driven GDP growth and broader improvements in Korean manufacturing fundamentals.
Citi identifies three primary tailwinds supporting the upgraded outlook: robust semiconductor export volumes, positive downstream effects from the semiconductor sector, and an expansionary fiscal policy stance by the South Korean government. Conversely, the note flags three headwinds: a tightening monetary policy environment, capital‑outflow pressure from foreign equity investors coupled with weakness in the Korean won, and the potential resumption of equity rebalancing by Korea’s National Pension Service (NPS).
The broker notes that the NPS could gradually restart rebalancing Korean equities if the KOSPI sustains levels above the 9,000‑10,000 range during 2026. Looking ahead to 2027, Citi expects earnings growth to broaden beyond artificial‑intelligence themes to include robotics, exporters, and manufacturing firms, while ongoing memory‑chip supply constraints are likely to keep the semiconductor up‑cycle intact.
Given that growth is projected to be concentrated in high‑quality stocks, Citi recommends a selective approach to Korean equities, emphasizing companies with resilient earnings driven by AI‑chip demand, U.S.–Korea cooperation in sectors such as shipbuilding, power and nuclear, and the broader wealth‑effect stimulus.