IBK Securities raises Kospi forecast to between 8,000 and 11,000, predicts summer rally could push index to 10,000
The financial firm lifted its yearly outlook for the main bourse, banking on a summer rally that could send the index past 10,000 due to economic indicators, earnings outlooks and semiconductor-related margins trending upward.
A screen in Hana Bank's trading room in central Seoul shows the Kospi reaching 8,962.66 during intraday trading on May 18.
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IBK Securities on Monday raised its Kospi outlook for the year to a range of 8,000 to 11,000, up from its previous forecast of 6,500 to 9,000.
"Through this summer rally, the Kospi is expected to reach 10,000 or above," IBK Securities analyst Byun Jun-ho said. "In the short term, the Kospi is expected to continue rising within the 8,000 to 11,000 range."
Byun cited a broad set of indicators supporting the upgraded outlook.
"Leading economic indicators, key domestic and external indicators, such as exports, and the earnings outlook and margin improvement centered on semiconductors are trending upward," he said. "The Kospi's 12-month forward return on equity has risen to 26 percent — an unprecedented high-margin level. The corresponding fair value 12-month forward price-to-book [P/B] ratio is estimated at approximately 2.3 times, corresponding to a Kospi level of around 10,000."
Byun added that the return on equity, or ROE, could climb further as the second-quarter earnings season gets underway and noted that the fair value P/B could exceed 2.3 times.
"The price-to-earnings [P/E] ratio is still at around 8 times, which remains significantly low, so we need to leave open the possibility of exceeding the 2.3 times forward P/B target," he said. "From a P/E perspective, the market remains significantly undervalued, meaning substantial upside potential persists."
Regarding Samsung Electronics, the bellwether of the Korean stock market, Byun said that upward revisions for its earnings estimates are ongoing and that an earnings surprise in the second quarter looks likely.
He pointed to historical precedent for sustained outperformance: During the fourth industrial revolution from 2016 to 2017 and the Covid-19 pandemic period from 2019 to 2020, the company posted above-consensus results four or more consecutive times.
"With results having already beaten market expectations three consecutive times, we need to watch for the possibility of another [similar announcement]," Byun said.
BY SHIN HYE-YEON [[email protected]]
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
