Key Takeaways:
Goldman Sachs raised its Kospi target to 12,000, implying roughly 90% upside as Korean leveraged ETF assets unwind from a June peak.
"Our conviction level in the stronger for longer cycle is really strong, very high," Tim Moe, Goldman Sachs chief Asia-Pacific equity strategist, said.
Korean leveraged ETF assets under management peaked at roughly $53 billion in June, collapsed to about $14 billion, and have since recovered to roughly $24 billion as retail investors faced margin calls and regulators tightened rules on leveraged products. Korea's 10-day volatility ran near 100% last week. The iShares MSCI South Korea ETF (EWY) is down 11.05% over the past month but up 64.82% year to date, while the Franklin FTSE South Korea ETF (FLKR) has posted a 10.75% one-month drawdown against a 65.29% year-to-date gain.
Moe's thesis rests on valuation and an earnings ramp tied to the AI capex cycle. The Kospi trades at 5.1 times forward earnings, roughly two standard deviations below historical norms, with earnings projected to grow 32% this year and 35% next year. The 12,000 target implies an 8x forward multiple on projected 2028 earnings.
Over 50% of the Kospi is the semiconductor sector, tied directly to the AI infrastructure buildout that Goldman's 2026 outlook has flagged as the dominant global earnings engine. Defense is Moe's second pillar. "The key takeaway is earnings. If earnings come through at current valuations, you have to be very bearish when you are out in order not to think the market will be higher," he said.
EWY is the largest and most concentrated US-listed vehicle mapped to Moe's thesis. Per its most recent NPORT filing as of May 31, 2026, the fund holds SK Hynix at 30.85% of net assets and Samsung Electronics at a combined 23.94% (common plus preferred). Together those two AI-memory bellwethers make up 54.74% of the fund. Total net assets sit at $24.14 billion. Automotive (Hyundai, Kia), financials (KB, Shinhan, Hana), and internet (NAVER) round out the exposure.
FLKR carries similar Korean equity exposure with less semiconductor concentration. As of March 31, 2026, SK Hynix accounts for 19.30% and Samsung Electronics for a combined 19.68%, with the balance spread across roughly 6.5% in defense and aerospace (Hanwha Aerospace, Korea Aerospace, HD Hyundai Heavy Industries, Samsung Heavy Industries), around 7% in financials, and meaningful weights in biotech (Celltrion, Samsung Biologics) and internet (Naver, Kakao). Total net assets are $420.78 million, a much smaller fund than EWY.
The mechanical distinction matters. Samsung Electronics and SK Hynix trade on the Korea Exchange, not a US venue, which is why ETFs are the practical route for a US investor. EWY leans harder into the semiconductor thesis Moe emphasizes. FLKR captures the defense-industrial angle he cited as a second pillar.
Moe framed the upside as conditional. "If the earnings come through, I think broadly when it settles down in the market finds the floor, we think the deadline will move it higher," he said. The near-term question is whether Korean leveraged-ETF AUM normalizes off the $14 billion low, whether 10-day volatility resets, and whether SK Hynix and Samsung Electronics can deliver the 32% and 35% earnings growth Goldman is modeling.
The call arrives as foreign investors turned net buyers of 7.2 trillion won ($5 billion) worth of Korean stock on Friday, more than double the previous one-day record, according to Reuters. The Kospi surged 17.9% that day before falling nearly 5% on Monday. J.P. Morgan analysts said the leveraged ETF unwind is complete and hedge funds are roughly 90% through deleveraging. Short interest on Korean stocks has fallen to about 4.3% from a peak of 5.3%. Samsung reported a 250-fold increase in chip profit in Q2, driven by data center demand.
For holders of EWY and FLKR, the Goldman call points to a potential re-rating if earnings materialize. The next test is whether the Kospi can hold its recent rebound and whether Samsung and SK Hynix deliver the projected earnings growth in upcoming quarterly reports.
This article is for informational purposes only and does not constitute investment advice.
