April 26, 2024

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[THE INVESTOR] Goldman Sachs has downgraded its outlook on Korean stocks in the latest report published on April 10, saying earnings expectations are “too optimistic.”

The report lowered Korea from an overweight rating to a market-weight rating, while reaffirming bullish calls on China, Japan and some Southeast Asian markets. 

“All markets saw improvement in earnings except for Korea and expectations are likely to reset in the next months as some estimates, such as margin forecasts, look too optimistic,” the report said. “There are a few imminent catalysts that could drive outperformance.”

The downgrade comes after the investment bank offered an upbeat outlook on Korea late last year, citing the nation’s bullish tech industry, smoother relations with China and investor-friendly policies by chaebol.

Regarding the low price-earnings ratio of the main bourse KOSPI, which was about 33 percent lower compared to other Asian markets, the group said the low valuation is not based on solid fundamentals, but due to lowered earnings forecasts for next year.

By Lee Ji-yoon (jylee@heraldcorp.com)