UBS cuts KOSPI target by nearly 10% to reflect higher rates

Investing.com -- UBS has cut its 12-month target for South Korea's KOSPI index to 8,000 from 8,800, citing higher interest rates, a stronger won and rising oil prices.

Analyst Yong-Suk Son said in a note Friday that the reduction, which lowers the implied multiple to 7 times earnings from 8 times, reflects mounting macro headwinds even as earnings growth remains strong.

He noted consensus earnings-per-share revisions, a key market driver, turned negative in September, falling 0.7% month over month after gains earlier in the year as memory-led upgrades reversed.

UBS still forecasts robust KOSPI EPS growth of 256% in 2026 and 38% in 2027, but Son said the index "may remain largely rangebound until upcoming Q3/Q4 earnings seasons provide greater clarity on earnings sustainability and shareholder return initiatives."

He pointed to a jump in the 10-year government bond yield to 4.5% from 3.4% at the start of the year, two Bank of Korea rate hikes since July and oil above $100 a barrel as pressures on the market.

A stronger won is a further drag, with UBS estimating KOSPI earnings fall about 1.1% for every 1% of appreciation.

On positioning, Son said "memory remains our preferred sector," including Samsung Electronics and SK Hynix, but the firm is tilting toward value and quality names with shareholder returns given slowing momentum and tighter liquidity.

UBS set upside and downside KOSPI targets of 9,200 and 5,100.

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