Goldman: Korea, Japan to Keep Outperforming Wall Street
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- Tony Pasquariello, Goldman Sachs's global head of hedge-fund coverage, called South Korea and Japan "bangers" in a weekend note and said both markets have further to rally in 2026.
- South Korea's KOSPI has more than doubled since the end of 2024 and is up 31% year-to-date in 2026, versus an essentially flat S&P 500 (down 0.14%); Japan's Nikkei 225 is up 12.9% over the same stretch.
- Goldman raised its KOSPI target to 6,400, implying over 20% upside, and forecast South Korean aggregate earnings growth of 120% in 2026 after a 36% gain last year.
- Samsung Electronics and SK Hynix, the KOSPI's two heaviest constituents, are up 51% and 35% respectively in 2026 on AI-linked chip demand, powering much of the index's move.
- Goldman cited four South Korea tailwinds: a 8.7 forward P/E and 7.8 24-month forward P/E, foreign positioning below the long-term midpoint despite $6 billion of net foreign selling this year, and a record ~100 trillion Korean won ($70 billion) in retail brokerage cash accounts.
- For Japan, Goldman said positioning is not stretched (prime-brokerage exposures still well below the pre-COVID peak) and flagged a "correlation switch" — higher Japanese rates and a stronger yen now pushing equities higher, which Pasquariello called a "reflation trade rather than a debasement trade."
- Goldman does not see evidence that investors are selling U.S. equities to fund overseas purchases, arguing instead that marginal new investment dollars are being redirected to non-U.S. markets and those flows are disproportionately moving smaller Asian indexes.
Why it matters: Goldman frames this not as a rotation OUT of U.S. stocks but as new capital being redirected abroad — and with KOSPI earnings forecast to jump 120% in 2026 behind Samsung and SK Hynix's AI-driven 35-51% rally, the bullish case rests on growth, not just multiple expansion. The call lands at a moment when the S&P 500 is flat, Nikkei is up 12.9%, and retail Korean brokerage accounts hold a record ~100 trillion won ($70 billion) of uninvested cash that could amplify the next leg up.
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