Foreign investment banks that once kept Korean equities at arm’s length are now scrambling to catch up as South Korea’s benchmark Kospi stock index surges past 4,200, setting a new record high and ranking as the best-performing major stock index of the year.
Driving the shift is a combination of easing US tariff risks, ongoing optimism over artificial intelligence and a global reappraisal of Korea’s industrial and tech champions.
In a sign of the changing mood, several leading global banks have recently upgraded their outlooks on Korean stocks, fueling expectations that more foreign investors could follow suit.
Switzerland’s UBS led the charge this week, issuing a bullish report on stocks of HD Hyundai Group, Korea’s industrial powerhouse, according to the securities industry on Monday.
The bank upgraded HD Hyundai Heavy Industries Co. to Buy from Neutral and nearly doubled its target price to 725,000 won ($507.42), calling the shipbuilder’s valuation far from stretched given its shift toward defense and military production.
It also lifted HD Korea Shipbuilding & Offshore Engineering Co., the group’s intermediate shipbuilding holding company, to 640,000 won, up 88% from its previous estimate.
UBS’s turnaround follows last week’s US-South Korea tariff accord, which is expected to accelerate the so-called “Make American Shipbuilding Great Again (MASGA)” initiative, a project aimed at revitalizing the US shipbuilding industry with Korean participation.
After months of negotiations, the two nations struck a final trade deal at a summit between South Korean President Lee Jae Myung and US President Donald Trump in Gyeongju, Korea.
UBS said HD Hyundai Heavy Industries trades at about 20 times expected 2028 earnings, well below Korean defense peers that fetch up to 29 times, leaving ample room for multiple expansion.
AUTOS AS TOP PICKS ON COST CUTS AND US SALES
Automakers are also back in favor.
Macquarie raised its target on Hyundai Motor Co. to 300,000 won from 260,000 won, crediting Korea’s largest carmaker’s cost savings of roughly 1 trillion won driven by its improved manufacturing efficiency and supply-chain optimization.
The Australian bank added that Hyundai’s expanding hybrid lineup has also given it a competitive edge in the US market.
Bank of America was similarly upbeat about its sibling company, lifting Kia Corp. price to 160,000 won from 116,000 won, saying the automaker is poised to break out of its trading range.
AI MOMENTUM LIFTS LG
Enthusiasm has spread to the LG Group, where several units are expected to benefit from the AI hardware boom.
HSBC raised the target price of LG Innotek Co. to 290,000 won from 220,000 won, citing the company’s better-than-expected third-quarter earnings and steady iPhone component demand that could sustain its momentum into the fourth quarter.
The bank expects the company’s earnings to outperform industry estimates through 2027.
CLSA also boosted LG Electronics Inc.’s target stock price to 110,000 won from 94,000 won, pointing to its fast-growing data-center cooling systems business as a structural profit driver in the AI era.
It also raised LG Display Co. to 16,000 won from 11,000 won, highlighting improved profitability from its business restructuring.
FOREIGN FLOWS COULD KEEP MOMENTUM ALIVE
Analysts say these upgrades could attract additional foreign capital inflows into Korean equities, reinforcing the rally that began in mid-2025.
Overseas investors have purchased more than 17.8 trillion won worth of Korean equities since July, helping fuel the market’s rally.
“The tone from foreign brokerages has shifted decisively,” said the head of a Seoul-based asset manager. “They are expected to continue paying close attention to Korean stocks.”
On Monday, the country’s benchmark Kospi stock index hit a fresh historic high of 4,221.87, up 2.8% from the previous session after extending its winning streak for four sessions in a row.
Buying interest remained concentrated in large-cap stocks, led by Samsung Electronics Co. and SK Hynix Inc., which together accounted for about 30% of total Kospi turnover today.
As the Kospi climbed to record highs, brokerages have raised their forecasts for 2026, reflecting growing confidence in Korea’s market momentum.
Yuanta Securities Co. has lifted its Kospi band projection to 3,800-4,600, LS Securities Co. raised its upper target to 4,500 from 4,100 and Daishin Securities Co. said the index could reach the high-4,000 range.
Earlier, KB Securities Co. and Korea Investment & Securities Co. had set upper targets at 5,000 and 4,600, respectively, about 18% above current levels.
Analysts expect semiconductors to remain the main driver of gains.
Still, some strategists caution that much of next year’s earnings optimism may already be priced in.
Others warn of a 10-15% correction after the market’s rapid ascent.
“If a pullback comes, semiconductors and shipbuilders remain the sectors to watch,” said Kim Young-il, head of strategy at a Seoul-based investment center.
