If You See A Bubble - Ride It
Gangnam style
Korea’s chart looks almost too good: straight lines up, AI everywhere, buybacks surging, there is even a copper angle, and foreign flows still not crowded. Valuations aren’t crazy. Earnings are accelerating. This is usually the moment markets start whispering “bubble", right before the hardest part: deciding whether to fade it… or ride it.
Did Young Madoff draw that curve?
The YTD curve for KOSPI looks a little "too easy"... up almost 15%.
Source: LSEG Workspace
King King KOSPI
The king of index performance last year has started the year with another bang. Note we are now overshooting the trend chanel, and RSI is at recent peak levels, trading around 85.
Source: LSEG Workspace
Let's all meet up at Kospi 5000
Goldman: "We expect another year of strong gains for Korean equities following a stellar 2025 performance. We forecast a 23% 12m USD total return in 2026, driven by above-consensus earnings growth amid a favorable macro backdrop and attractive themes. A supportive global macro environment, constructive fundamentals in Korean tech, industrial opportunities arising from geopolitical realignment, and continued corporate governance reform."
Source: Goldman
Korean Goldilocks
Domestic economy is expected to rebound in 2026 along with one policy cut in Q2/2026 and stronger KRW.
Source: Goldman
Macro tailwinds
Lower US short-term rates and a weaker dollar tend to strongly support Asian equity performance, notably in Korea, Taiwan, AEJ DMs, and cyclical sectors.
Source: FactSet
Got the AI angle
Hyperscaler capex is driving increases in semiconductor demand leading to large DRAM and NAND undersupply, in turn driving higher prices and operating profits in the semiconductor industry.
Source: Goldman
Geopolitical winner too
Elevated geopolitical risks have created multiple industrial opportunities for Korean companies.
Source: FactSet
Buyback bid
Buyback activities accelerating from late 2024 and into 2025.
Source: Datastream
Korea the Copper play...
Copper prices and KOSPI earnings have exhibited a highly positive correlation sharing global macro cycles.
Source: FactSet
Still "cheap"
Despite the re-rating in 2025, Korean market still trades at a wide discount relative to EM and DM markets.
Source: MSCI
Earnings growth
GS: "We expect above-consensus earnings growth following two consecutive years of strong earnings growth."
Source: Goldman
What other liquid market can you buy around "average"?
Considering strong earnings revisions, KOSPI NTM P/E also remains around historical average.
Source: Quantiwise
Not crowded
Overall flows are not crowded by any investor type despite the recent foreign inflows.
Source: Quantiwise
Won
"The South Korean won extended its decline toward its weakest level since the global financial crisis, intensifying pressure on authorities to defend the currency as local investors shift funds overseas." (Bloomberg)
Source: LSEG Workspace
Squeeze bubble
This is what happens when you add explosive squeeze to a bubble. Samsung electronics, massive AI play, has exploded to the upside lately. This is extremely overbought with RSI trading around the highest levels since 2021 actually.
