SKN | Morgan Stanley Lifts 2026 KOSPI Target on Earnings Momentum and Reform Tailwinds

Key Points

• Morgan Stanley raised its end-2026 KOSPI target to 5,200 from 4,500.

• Bull-case scenario lifted to 6,000, with a bear case of 4,200.

• Earnings growth expected to be front-loaded in 2026, led by semiconductors.

• Structural reforms and capital-market improvements underpin the outlook.

Morgan Stanley has raised its end-2026 target for South Korea’s benchmark KOSPI index, citing strong earnings momentum and supportive structural reforms that could extend the market’s rally. In a research note, the bank lifted its base-case target to 5,200 from 4,500 and said it is increasingly leaning toward its bull-case scenario of 6,000.

The analysts also introduced a new three- to six-month trading range of 4,600 to 5,800, reflecting expectations for a stronger first half of 2026 relative to the second half.

Earnings Strength Drives Re-Rating

Morgan Stanley said South Korea remains one of the most attractively positioned equity markets in Asia, supported by improving earnings revision trends and exposure to long-running technology and industrial super-cycles. Earnings growth is expected to be front-loaded this year, with a recovery in semiconductors and sustained demand linked to artificial intelligence and energy-transition themes.

This earnings visibility has been a key driver behind the bank’s more constructive stance despite the sharp rally since late 2025.

Structural Reform Adds Support

Beyond earnings, the bank highlighted continued government-led corporate governance and capital-market reforms as an important tailwind. These initiatives are seen as improving capital efficiency, shareholder returns, and overall market quality, reinforcing the case for a higher valuation multiple over time.

Such reforms have increasingly drawn global investor attention to Korean equities.

Pullbacks Seen as Tactical, Not Structural

While the KOSPI is approaching the psychologically significant 5,000 level after a near-vertical rise, Morgan Stanley expects any near-term corrections to be shallow and short-lived. The analysts noted that geopolitical risks have historically triggered temporary volatility rather than sustained drawdowns in South Korean equities.

As a result, pullbacks are viewed more as tactical opportunities than signals of a trend reversal.

Sector Preferences Remain Cyclical-Tilted

Morgan Stanley reiterated overweight positions in information technology, industrials, and autos, reflecting confidence in global demand cycles. The bank also remains constructive on financials, particularly securities firms that could benefit from stronger capital-markets activity as trading volumes and deal flow improve.

Outlook

With earnings momentum, reform tailwinds, and sectoral super-cycles aligned, Morgan Stanley sees further upside potential for South Korean equities into 2026. While volatility may rise after the market’s rapid ascent, the bank’s raised targets suggest confidence that the broader trend remains intact.

For a confidential discussion on how Korean equity exposure, earnings-driven upside, and Asia-Pacific allocation strategies can be evaluated within a global portfolio, contact our senior advisory team.