Goldman Sachs expected the South Korea market to yield the highest earnings growth next year as the undervalued Kospi this year will become more attractive next year.
The investment bank expected Kospi earnings growth to rise 54% in 2024 and 20% in 2025. Goldman noted that the recovery in the semiconductor sector from profit decline should help the South Korea markets surging. Moreover, Goldman also added that the recent ban on short-selling is also a potential catalyst for the rise next year as well.
The Korea Composite Stock Price Index (Kospi) has a price-to-book ratio of 0.92 and the price-to-earnings ratio is at 18.93. According to the global measure, a number below 1 for a price-to-book ratio indicates that stock may be below its fair value despite a 13% gain on the main bourse this year.
Among all securities in the index, Goldman saw defense stocks to be the most attractive sector as South Korea is one of the largest weapons suppliers in the world apart from China.
Additionally, Goldman noted that based on historical data, Kospi performed strongly by at least 10% over the following 6 months after a short-selling ban.