Under the shadow of geopolitical conflicts in the Middle East, South Korea's KOSPI index has recently faced a severe sell-off of up to 20%. However, Goldman Sachs has recently stated: do not be blinded by the short-term plunge; the South Korean stock market will still reach new highs after consolidation.
On March 7th, according to news from the Wind Trading Desk, the core signal of Goldman Sachs' research report is clear: panic selling creates buying opportunities, not escape signals.
Goldman Sachs stated that considering the astonishing increase of 176% in South Korean stocks since April 2025, the current decline is merely a &#34;delayed correction,&#34; not the beginning of a bear market. South Korean stocks will not sink as a result, but will reach new highs after consolidation.
The report emphasizes that more importantly, based on the strong performance of semiconductor memory chip prices, Goldman Sachs has further raised its earnings growth forecast for the South Korean market in 2026 to 130% and significantly raised the KOSPI index target price to 7,000 points, indicating that the market still has a potential upside of 25%.
<h2>The Truth Behind the 20% Plunge: In the Context of a 176% Increase, It's Just an Oversold Correction</h2>
Goldman Sachs pointed out in the report that to understand this decline, one must first understand where it came from.
The recent conflict in the Middle East has triggered a sell-off in Asian stock markets, with the South Korean market being the hardest hit. In the initial trading days following the outbreak of the conflict, the KOSPI index fell 20% from its closing high on February 26, with March 4 marking a record single-day drop of 12.06%, raising market concerns about a &#34;collapse&#34; or &#34;bear market.&#34;
However, Goldman Sachs emphasized that this decline must be viewed in the context of the previous surge.
<blockquote>
From the low on April 9, 2025, to the high at the end of February 2026, the KOSPI has cumulatively risen by 176%; even from the phase low on November 21, 2025, the increase is as high as 65%. In this context, the 20% correction from the closing high on February 26 to now only accounts for half of the recent increase, less than one-third of the complete increase (30%).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5bc8ac33-550e-42bf-bd49-d0df215984a4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5bc8ac33-550e-42bf-bd49-d0df215984a4.png"/>
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The report specifically points out that more critically, the KOSPI's single-day plunge of 12.06% on March 4 set a historical record, but then rebounded by 10% on March 5, with the index regaining the 30-day moving average, indicating that the long-term upward trend has not been broken. Goldman Sachs believes that this trend characteristic suggests that the current decline should be classified as an oversold correction, not the beginning of a bear market.
Historical data also supports this judgment. Goldman Sachs stated that reviewing the most severe single-day drop events in KOSPI history—including the 9/11 attacks (-12.0%), the global financial crisis (-10.6%), and the COVID-19 pandemic (-8.4%)—the average returns in the following 3 months, 6 months, and 12 months were 15.8%, 25.4%, and 49.4% respectively (provided that the fundamentals have not fundamentally deteriorated)
In addition, historically, whenever the global geopolitical risk index surges, the South Korean stock market tends to decline simultaneously, but it has achieved significant rebounds in the following 1 to 2 quarters.
<h2>Market positions are not overly crowded, and the risk of sell-off is exaggerated</h2>
The research report states that the market's concern about &#34;overcrowded positions potentially triggering a chain of forced liquidations&#34; is one of the most unsettling narratives for investors during this decline. Goldman Sachs believes that this concern is significantly exaggerated by breaking down the position data layer by layer.
<blockquote>
<ul>
<li>Foreign capital: Since the beginning of the year, foreign capital has net sold $15 billion, mainly concentrated in semiconductor stocks such as SK Hynix (which saw a rise of 70% at one point this year) and Samsung Electronics (+85%), partly due to the passive rebalancing of the EWY iShares MSCI Korea ETF. Nevertheless, the proportion of foreign ownership in South Korean stocks remains at 34.5%, which is +0.7 standard deviations above the average since 2000—positions are relatively full but not extremely stretched.</li>
<li>Retail investors: Retail investors were net sellers overall in 2025 and early 2026, only turning to net buyers in February. Although the financing balance has reached a historical high in absolute terms (33 trillion won), the ratio relative to the total market capitalization is only 0.6%, which is at a near five-year low, indicating limited leverage risk.</li>
<li>Domestic institutions: Domestic institutional investors have been continuously net buyers since last year, with net inflows of 19.9 trillion won from the beginning of 2026 to date, but their holding ratio is still below the historical average, indicating there is still room for increased holdings rather than facing pressure to reduce positions.</li>
</ul>
</blockquote>
Overall, Goldman Sachs believes that the current position structure does not constitute a systemic risk of forced liquidations, and the market's panic sentiment exceeds what the fundamentals can support.
<h2>Earnings expectations raised for the third time this year, semiconductor supercycle gaining momentum</h2>
The fundamentals are Goldman Sachs' strongest confidence in being bullish on Korean stocks. Goldman Sachs has raised its earnings growth forecast for the South Korean market in 2026 from 120% to 130%, marking the third adjustment this year, with the core driver being the continued strong performance of the semiconductor storage industry.
<blockquote>
Specifically, the sustained capital expenditures of hyperscale cloud computing companies are driving strong growth in DRAM and NAND demand, while the supply-side shortage continues, leading to a sustained increase in the average selling price (ASP) of storage chips—TrendForce has once again raised its ASP forecast for DRAM and NAND. South Korea's storage chip exports reached a historic high in February.
</blockquote>
Goldman Sachs' Earnings Revision Leading Indicator (ERLI)—which predicts the direction of earnings forecast revisions by sell-side analysts over the next two months based on high-frequency macro and industry data—currently shows the most optimistic predictions for South Korea and the technology sector among all Asia-Pacific markets and industries. Additionally, the performance in the fourth quarter of 2025 slightly exceeded expectations, indicating that the earnings growth in 2026 is built on a solid foundation.
<h2>Valuation is highly attractive, raising the KOSPI target price to 7,000 points</h2>
Goldman Sachs believes that after experiencing a net correction of about 12% in this round, the valuation attractiveness of the South Korean market has further increased.
Currently, the KOSPI index's 12-month forward price-to-earnings ratio (P/E) is only 8.8 times (below the historical average by 0.8 standard deviations), the price-to-book ratio (P/B) is 1.8 times, while the return on equity (ROE) exceeds 20%. Even excluding Samsung and SK Hynix, the market's 12-month forward P/E is only 12.9 times, which is still undervalued compared to regional peers.
Based on higher earnings expectations, Goldman Sachs has raised its target price for the KOSPI index at the end of 2026 from 6,400 points to 7,000 points (target P/E of 9.8 times).
This implies a potential price return rate of 25% for the market, and when accounting for potential currency appreciation and dividend yield, the total return rate in USD terms will reach 28%. Goldman Sachs firmly maintains an &#34;overweight&#34; (OW) rating for South Korea in its regional market allocation.
At the same time, the upward adjustment of the target price for South Korea has also led Goldman Sachs to raise the year-end target for MXAPJ (MSCI Asia Pacific Ex-Japan Index) from 890 points to 900 points.
In addition, Goldman Sachs has adjusted its rating for the regional energy sector from underweight (UW) to neutral (MW), citing that the recent rise in oil prices due to Middle Eastern conflicts and the demand for strategic reserve replenishment may provide downward support for oil prices

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Goldman Sachs believes that, given the 176% increase since April 2025, the South Korean stock market is merely undergoing a correction rather than entering a bear market. Data from foreign investors and retail investors indicate that market positions are not overly crowded. Based on strong demand for semiconductor memory chips, Goldman Sachs has raised its 2026 earnings growth forecast for the South Korean market to 130% and significantly increased the KOSPI target price to 7,000 points, implying an additional 25% upside potential

- The KOSPI index in South Korea recently experienced a sharp 20% decline amid geopolitical tensions in the Middle East, but Goldman Sachs maintains this presents a buying opportunity rather than a sign of a bear market.  
- Highlighting a 176% rally since April 2025, Goldman Sachs views the current downturn as a normal correction, predicting a further increase in the KOSPI index to a target of 7000 points, reflecting a potential 25% upside.  
- The report emphasizes robust semiconductor performance as a driver for profit growth, raising forecasts for 2026 to 130%.

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What if there is a 20% pullback? Goldman Sachs: Korean stocks will reach new highs after consolidation