The latest sell-off in Korean stocks has indeed been brutal, with the KOSPI plunging 3.65% in a single day, while Samsung Electronics and SK hynix tumbled 4.39% and 4.52%, respectively, falling back into the 6300-point range for the first time in two months. But I want to discuss this from a valuation perspective.

Goldman's latest report points out that the KOSPI's 12-month forward P/E ratio has fallen to 5.78x, lower than the bottom reached during the 2008 global financial crisis and the lowest valuation since 2004. Even assuming earnings per share suffered a 41% cut—the worst level during the financial crisis—and applying the valuation multiple from that period, the KOSPI would still correspond to a level near 8965 points, far above its current level.

Looking at earnings, Samsung Electronics' latest quarterly operating profit increased nearly eightfold year over year to approximately KRW 107.4 trillion, while SK hynix's operating profit and margin also reached record highs. The earnings fundamentals have not collapsed; the decline is driven more by a liquidity shock triggered by large-scale foreign outflows—the proportion of Samsung Electronics held by foreign investors has fallen to a roughly 17-year low, while foreign capital withdrawn from Korean stocks this year has reached $131 billion, the highest among major Asian markets.

Goldman maintains its 12-month KOSPI target of 12000 points, implying approximately 80% upside from current levels. The core rationale is that the memory chip cycle will be “stronger and longer.” Samsung and SK hynix trade at forward P/E ratios of just 3.7x and 3.5x for 2027, respectively, suggesting that investors are clearly applying excessive discounts for the risk of future earnings declines.

I will not go all-in at once, but I will begin building a position in stages at the current valuation range. The AI demand narrative for memory chips has not been disproven, while valuations have already priced in the most pessimistic scenario.
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