Goldman Sees Value in Underperforming Korean Stocks

KOSPI Dips Amid Foreign Outflows

According to Goldman Sachs, South Korea’s KOSPI index experienced a significant 6% decline on Friday, erasing its gains for the week. This downturn was primarily driven by strong foreign investor outflows and market sentiment surrounding the Trump-Xi Summit.

Market Performance Overview

Foreign investors continued to sell KOSPI stocks, with notable outflows from the Tech and Auto sectors. The Korean won also weakened, falling 2.6% against the US dollar. While the Auto, Insurance, and Telecom sectors showed resilience, sectors like Shipbuilding and Utilities underperformed significantly. The Korea Equity Risk Barometer remains in risk-averse territory at -0.9.

Investment Opportunities Amid Concentration

Despite the KOSPI's year-to-date gains, market concentration is high, with just 68 stocks outperforming the index. Goldman Sachs identifies potential opportunities in underperforming stocks, particularly smaller companies, as nearly 70% of KOSPI-listed stocks are trading below their book value. An improvement in market breadth could unlock value in these segments.

Future Outlook and Key Factors

Looking ahead, Korea is expected to see a net passive inflow of $1.9 billion from the MSCI May 2026 index review. This, combined with a potential rebound in market breadth from low levels, suggests a shifting landscape for investors focusing on the Korean market.

FAQ

Q: Why did the South Korean KOSPI index fall recently?
A: The index fell 6% due to strong outflows from foreign investors and market concerns related to the Trump-Xi Summit.

Q: Where does Goldman Sachs see investment opportunities in Korea?
A: Goldman Sachs identifies potential opportunities in underperforming small and mid-cap stocks, many of which are trading below their book value.

Source: Investing.com