Kospi could reach as high as 15,000 points! JPMorgan is extremely bullish on the South Korean stock market, raising the Kospi target three times in two months.

Kospi could reach as high as 15,000 points! JPMorgan is extremely bullish on the South Korean stock market, raising the Kospi target three times in two months.

Benefiting from the surge in AI demand and the super cycle of memory chips, JPMorgan has sharply raised the target price of Korea's Kospi Index again within just one month, with a bullish target as high as 15,000 points, highlighting Wall Street's strong optimism for this market.

In a report released on Thursday (June 25), JPMorgan raised the Kospi Index's baseline target price from 10,000 points in May to 12,500 points, and set a bull market target of 15,000 points and a bear market target of 8,000 points. The firm continues to list Korea as its top stock market pick in Asia, recommending investors increase exposure during pullbacks and maintain maximum allocation to the Korean market.

This adjustment continues JPMorgan’s recent intensive bullish stance. Wall Street Insights wrote in a May 11 article that JPMorgan had already made a second upward adjustment within less than a month, raising its baseline target to 9,000 points and its bull market target to 10,000 points. A month later, as the Kospi Index broke past the 9,000-point threshold last week, JPMorgan refreshed its target forecasts once again.

Despite facing the pressure of foreign selling and increased market volatility, JPMorgan strategists explicitly stated that AI-driven profit growth will offset these negative factors. This statement not only reinforces confidence in the earnings ability of Korean tech stocks, but also directly reflects the ongoing global pursuit of core assets in the AI industry chain.

Aside from JPMorgan, Goldman Sachs recently raised its Kospi target to 12,000 points, and Morgan Stanley raised its target to 10,500 points. Major foreign brokerage houses generally believe that Korea’s AI profit momentum remains the key driver for further stock market gains.

AI chip earnings become the core logic, memory cycle supports upside

The core basis for this JPMorgan upgrade is that the earnings scale of Korean memory chip companies is now large enough to have a systemic impact on the macroeconomy.

JPMorgan points out that the profits of AI-related chip manufacturers are now large enough to affect corporate tax revenue, household wealth, and government taxation, making Korea one of the most direct beneficiaries in the global AI cycle among stock markets.

JPMorgan maintains its view that the memory chip "stays high for longer" cycle will persist, believing Korean tech companies' profits are highly sensitive to AI data center spending, and the presence of pricing power supports this judgement. Reviewing this year’s path of upgrades:

At the end of April, JPMorgan first set the baseline target at 7,000 points and the bull market target at 8,500 points; less than a month later in May, it upgraded the baseline target to 10,000 points and the bull target to 10,000 points; now, the baseline target climbs further to 12,500 points, the bull target jumps to 15,000 points, and the bear target is set at 8,000 points.

This upgrade comes less than a month since JPMorgan's previous target revision. Wall Street Insights wrote that JPMorgan raised the Kospi baseline target from 7,000 to 9,000 points on May 11 and the bull scenario target from 8,500 to 10,000 points, which was also less than a month after the previous upgrade at the end of April.

At that time, JPMorgan strategists including Mixo Das indicated in their research report that core fundamentals such as memory cycle conditions, corporate governance reforms, and thematic growth were still on track. Memory chip stocks have a 50% weight in the Kospi Index, contributing about 70% of the gains earlier this year.

The next two years may see a sustained upward cycle for memory chips, driven by simultaneous increases in average selling price and shipment volume – global AI infrastructure construction is driving continuous expansion of demand for memory chips, pushing prices and volumes to rise together.

Large-scale foreign selling poses major pressure, leveraged ETFs amplify volatility

Despite a clear bullish logic in the fundamentals, JPMorgan simultaneously warns of structural pressures facing the market.

The firm estimates that overseas investors have sold about $95 billion of Korean stocks so far this year, with over 90% of outflows concentrated in the two major memory chip stocks. Because these two stocks have very large market caps, some emerging market investors have hit their position authorization limits and are forced to keep reducing holdings during rebounds.

Meanwhile, the size of leveraged ETFs linked to Korean stocks has grown to about $50 billion, amplifying price swings through futures, options, and spot market activities, driving implied volatility sharply higher. JPMorgan points out that this market structure feature is aggravating short-term swings in the Index.

Foreign selling pressure has also transmitted to the currency level, putting the won under pressure. However, JPMorgan notes that potential rate hikes by Bank of Korea and seasonal tax-related flows in August may provide some support for the won.

Amid persistent foreign outflows, domestic Korean investors have become an important force for absorbing shares. JPMorgan estimates that Korean retail investors have bought about $80 billion worth of local stocks this year, including ETF inflows.

The firm believes that retail demand is likely to continue, since households are shifting funds back from overseas stocks and domestic real estate investment channels are restricted, making the stock market increasingly attractive for retail funds.

This internal capital cycle has to some extent offset the impact of foreign outflows, and is also one of the structural supports for JPMorgan’s sustained bullish stance.

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