Goldman sees opportunities in underperforming Korean stocks

Investing.com -- South Korea's KOSPI index fell 6% on Friday, wiping out weekly gains as the Trump-Xi Summit and strong foreign outflows weighed on the market, according to Goldman Sachs.

The Auto, Insurance and Telecom sectors outperformed this week, while Shipbuilding, Securities and Utilities sectors lagged. Foreign investors continued selling KOSPI stocks, with outflows concentrated in KOSPI Tech and Auto sectors.

The Korean won weakened 2.6% against the US dollar this week and declined 1.4% against both the Japanese yen and euro. The Korea Equity Risk Barometer stood at -0.9, remaining in risk-averse territory.

Despite the KOSPI's 78% year-to-date gain, only 68 out of 835 listed stocks have outperformed the index, Goldman noted. These stocks account for nearly 66% of total market capitalization, highlighting high market concentration.

Goldman identified potential opportunities among underperforming stocks, particularly if market breadth improves. Korea's daily market breadth recently rebounded from below the -1 standard deviation level.

The KOSPI 50 large-cap index has outperformed the KOSPI 200 small- and mid-cap segment by more than 2 standard deviations, suggesting potential opportunities in smaller companies. Nearly 70% of KOSPI-listed stocks trade below book value.

KOSPI 12-month forward earnings per share was revised up 0.1%. The Securities sector saw the strongest upward earnings revisions, while Utilities was revised down the most.

MSCI announced results of its May 2026 index review on May 12, with changes taking effect after the close on May 29. Korea will see one of the largest passive inflows among regional markets at $1.9 billion on a net basis, despite three Korean stocks being removed from the MSCI Standard Index.

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