South Korean equities continue to offer what Macquarie describes as attractive valuations even after a powerful multi-year advance. In a recent research note, analysts Daniel Kim and James Hong said the market's gains have been underpinned by fundamental earnings momentum and supportive liquidity conditions, and that those forces could carry the market higher through 2026.
Macquarie suggested the KOSPI index could move toward the 8,000 level in 2026, citing a combination of "strong earnings growth, ample liquidity, and equity-friendly government policies." The analysts noted that, despite an approximately 160% rally since 2024, the market appears to remain inexpensive relative to projected profit growth.
On a valuation basis, the bank estimates the market is trading around 9 times expected 2026 earnings, even as its coverage universe for Korea is forecast to deliver roughly 114% earnings-per-share growth in 2026. That dynamic has led Macquarie to conclude that the recent rally has been driven more by improving corporate profits than by a broad re-rating of multiples.
Memory chipmakers sit at the center of Macquarie's constructive outlook. The firm expects Samsung Electronics (KS:005930) and SK Hynix (KS:000660) to together account for about 52% of total net profits in 2026 and to constitute roughly 90% of the anticipated net-profit increase. The analysts warned the memory industry is experiencing what they describe as "the most severe memory supply crunch on record," with no relief expected over the next two to three years as artificial intelligence demand soaks up available capacity.
Because of that shortage, Macquarie forecasts Korean corporate earnings momentum to remain robust into 2027E. The analysts say there is substantial upside potential to memory prices and that current consensus earnings forecasts do not fully capture that upside.
Beyond semiconductors, the firm also favors a group of what it calls neo-industrial exporters. Defence, shipbuilding and power equipment makers are viewed as being in the early stages of extended upcycles, supported by limited global competition and widening geopolitical divides that the analysts believe benefit Korean suppliers.
Policy and flow dynamics are also described as becoming more supportive for equities. Macquarie points to government measures encouraging a shift of household assets from property into listed equities, noting Korean households allocate about 65% of assets to property versus roughly 50% across OECD peers. The bank also highlights rising ETF inflows, increased share buybacks and a planned Reshoring Investment Account as additional sources of equity demand.
Reflecting these views, Macquarie said it maintains overweight positions in several sectors, including memory, defence, power equipment, bio/healthcare, shipbuilding and K-beauty.
Key takeaways
- Macquarie sees KOSPI potentially approaching 8,000 in 2026 on strong earnings, liquidity and supportive policy.
- Market valuations of around 9x 2026 earnings look modest relative to an expected 114% EPS growth in 2026 across the bank's Korea coverage.
- Semiconductor firms, notably Samsung Electronics and SK Hynix, are expected to account for the majority of net-profit gains in 2026; neo-industrial exporters are also favored.
Risks and uncertainties
- Memory supply dynamics: Macquarie flags a severe supply crunch in memory, and any deviation from the anticipated two-to-three-year tightness could change earnings trajectories for chipmakers.
- Policy implementation and household rotation: Plans to shift household asset allocation from property into equities are cited as supportive, but the pace and effectiveness of such measures remain a variable.
- Geopolitical and demand-side shifts: The firm's positive view on neo-industrial exporters relies on limited global competition and geopolitical trends that may evolve unpredictably.