Global investment banks turn bullish on Korean stocks

A screen at Hana Bank's headquarters in Seoul displays the benchmark KOSPI closing at 3,657.28 on Wednesday, up 2.68 percent from the previous trading day. Yonhap

Global investment banks are turning bullish on Korea’s stock market, citing momentum from an AI-led boom and ongoing corporate governance reforms, industry officials said Wednesday.

That same day, the benchmark KOSPI hit an intraday high of 3,659.91 and closed at 3,657.28 — both record highs — as easing U.S.–China tensions and growing expectations of a U.S. Federal Reserve rate cut boosted investor sentiment.

Foreign and institutional investors drove the rally, net buying stocks worth 129.6 billion won ($91.3 million) and 799 billion won, respectively, while retail investors sold off 981.2 billion won.

Further gains are seen as likely. Morgan Stanley raised its KOSPI target to 3,800 from 3,250 in a report Monday, and said the index could reach 4,200 if tech stocks maintain their rally and broader industry recovery continues.

The report cautioned that global trade tensions may trigger short-term volatility, but added that structural growth drivers including supercycles in AI, power generation, defense and K-culture are boosting the index's long-term potential. It particularly recommended overweight positions in SK hynix and the broader tech sector.

J.P. Morgan also upgraded its outlook. The firm said Friday that if corporate governance reforms, shareholder returns and capital efficiency improve as expected, the KOSPI could trade between 4,000 and 5,000 within the next year.

Citing the Korea Capital Market Conference hosted by the Korea Exchange in Seoul on Sept. 29, J.P. Morgan noted that the government and regulators are moving beyond rhetoric and taking concrete steps to improve corporate governance.

It added that further monetary easing and a valuation re-rating could even push the index past 5,000, a target set by President Lee Jae Myung as part of his election campaign.

"Korea has been among this year's strongest EM (emerging market) performers," said Dina Ting, Franklin Templeton's head of global index portfolio management. "For those seeking exposure to sectors at the intersection of global industry, culture and health care, Korea remains a compelling choice, in our opinion."

Reflecting this optimism, Korea's weighting in the MSCI Emerging Markets Index — a benchmark for global investors — rose 2 percentage points over the past six months, reaching about 11 percent at the end of September.

This marks a rebound from its weighting of 9.04 percent last December, when shares declined amid the martial law crisis. Subsequent political disruption saw it fall to 8.99 percent in March, the lowest level since the Asian financial crisis in 1998.

The domestic market rally has coincided with a corresponding rise in Korea's index weighting. Since President Lee's inauguration on June 4, the benchmark KOSPI has consistently reached record highs.

The MSCI Korea Index has jumped 53.62 percent over the past six months. In comparison, the MSCI Emerging Markets Index rose 26.62 percent, while the MSCI World Index gained 21.83 percent.