Logo of Goldman Sachs / Courtesy of Goldman Sachs
Korea offers the greatest earnings growth potential in the Asia-Pacific region next year, supported by a recovery in tech industry exports, Goldman Sachs said on Tuesday.
The global investment bank anticipates the Korean economy to grow 2.3 percent in 2024, slightly above market consensus, and expects the benchmark KOSPI to reach 2,800.
The report, "Korea 2024 Equity Outlook," suggests that the Korean economy has already reached the trough of its economic cycle and is poised for a rebound. This contrasts with the projected slowdown in gross domestic product (GDP) growth across the Asia-Pacific region.
"For Korea, 2023 has been rather a below-potential growth year with the export cycle bottoming out and high exposure to the semiconductor downturn cycle. However, we expect the Korean economy to rebound in 2024 led by exports and industrial production after weak growth in 2023," Goldman Sachs said in the report.
"Exports are likely to recover from a post-pandemic goods recession caused by a swing in pandemic-era consumption patterns. In addition, idiosyncratic AI-related demand should help boost tech exports from Korea with positive domestic spillovers," it added.
That forecast is more optimistic than those of other global financial institutions and even the Korean government, which has projected a maximum growth rate of 2.2 percent next year.
gettyimagesbank
However, given that Korean companies have a high level of exposure to major economies, the resilience of these economies, particularly the U.S., is deemed crucial for Korea's performance in the upcoming year.
In its assessment of the Korean stock market, the report maintained an "overweight" investment rating, along with a prediction that the KOSPI could surpass 2,800 in the coming year.
"The overall equity market valuation still looks attractive, especially post increased volatility from rising bond yields in the second half of this year," it wrote, citing that Korea is currently trading at a 64 percent price-to-book (P/B) discount compared to global developed markets.
It recommended sectors such as tech hardware, internet media and entertainment, automobiles, healthcare and telecom as having significant potential.
However, the investment bank estimated that Korea's inclusion in the MSCI might be unlikely, as the implementation of a short selling ban could pose a hurdle, despite the government's efforts to secure inclusion.
"Although short selling-related assessments by MSCI do not appear to have raised much of an issue in past market accessibility reviews, as it had been still partially allowed for 200 stocks on the KOSPI and 150 stocks on the Kosdaq, we think the recent short selling ban could prove different, with potential for the short selling issue to be assessed as needing improvement," it said.
Earlier this month, Korean financial authorities announced a complete ban on short selling until the end of June next year. This came in response to the discovery of widespread short selling practices by global investment banks operating in Korea.
Despite this, the government's efforts to enhance Korea's financial system have been highly regarded, particularly in areas such as the dividend payout process and the accessibility of the foreign exchange market.
![[INTERVIEW] How AmazeVR revolutionizes aespa's LYNK-POP concert](https://img.koreatimes.co.kr/upload/thumbnailV2/4431833759c44bdaa414cb314e90f2fe.jpg/dims/resize/178/optimize)
