Morgan Stanley has increased its year-end 2026 target for South Korea's benchmark stock index, reflecting what the bank describes as strong earnings momentum and supportive structural reforms in the corporate and capital markets.
The firm raised its end-2026 KOSPI target to 5,200 from 4,500 and said it is leaning closer to a bull-case outlook of 6,000, while still noting a bear case of 4,200. For the next three to six months it set a trading range between 4,600 and 5,800, anticipating a stronger first half of 2026 compared with the second half.
According to the bank's research note, South Korea is among the best-positioned equity markets in Asia. The assessment rests on several pillars: large cyclical tailwinds in technology and industrials; an improving pattern of earnings revisions; and continued government-driven corporate and capital market reforms.
On earnings, Morgan Stanley expects growth to be concentrated earlier in the year, backed by a recovery in semiconductors and healthy demand connected to artificial intelligence and energy transition themes. These drivers, the bank argues, are key to the near-term upside potential for Korean equities.
The analysts acknowledged that the KOSPI has approached the 5,000 level after a steep rally since late 2025, but they judged any short-term pullback to be likely shallow and temporary. They also said that while geopolitical events have produced volatility in the past, these episodes have tended to be brief rather than inflicting prolonged damage on Korean stocks.
In terms of sector positioning, Morgan Stanley reiterated overweight stances in information technology, industrials, and autos. The bank also remained constructive on financials, calling out securities firms as potential beneficiaries if capital markets activity strengthens.
Context notes - The firm’s revised targets and trading range reflect an outlook that combines cyclical recovery and structural reform momentum. The emphasis on semiconductors, AI-related demand and energy transition ties back to the sectors highlighted as key contributors to earnings strength.