Despite a significant surge in the KOSPI recently, driven by strong earnings from semiconductor companies, analysis shows that its valuation is actually lower than it was during the global financial crisis.
Bloomberg reported that as of July 9, the KOSPI's 12-month forward price-to-earnings ratio (PER) stood at 6.35, which is lower than the 6.82 recorded on October 26, 2008, at the height of the global financial crisis.
This is nearly half the level of its 52-week high of 11.98.
The KOSPI has soared 77% this year, bolstered by a sharp increase in profits from Samsung Electronics and SK Hynix.
Unlike most bull markets, this rally is analyzed as being driven by actual corporate earnings that far exceeded expectations, rather than an overheating of investor sentiment.
The 12-month forward earnings per share (EPS) estimate for the KOSPI has been revised upward by approximately 170% this year.
This marks the highest growth rate since 2006.
The media outlet analyzed that the current valuation of the KOSPI is only one-third that of the Taiwan Capitalization Weighted Stock Index (TAIEX), which has a similar weighting of semiconductor stocks, indicating that the chronic Korea Discount phenomenon persists.
Bloomberg pointed out that the KOSPI has long been undervalued due to the so-called Korea Discount, attributed to corporate governance issues and the cyclical profit structure of Samsung Electronics and SK Hynix.
Investor perspectives remain divided.
The chief Asia strategist at Indosuez Wealth Management stated, "If you don't have much exposure to these stocks, it is a good time to secure growth elements in your portfolio linked to the AI theme."
On the other hand, the chief investment strategist at Saxo Markets pointed out that undervaluation itself is not a reason to buy, noting that "Korea needs evidence that the memory super-cycle still has momentum."
Foreign media outlets suggested that moves such as SK Hynix's push for a U.S. listing could serve as a catalyst to resolve the undervaluation, while also diagnosing that the pursuit by Chinese companies and the high volatility of semiconductor stocks remain investment risk factors.
Reported by Jung Da-eun | Video by Choi Kang-san | Graphics by Lee Jung-ju | Produced by SBS Digital News
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