"With Korean stocks in this state, they still see 10,000..." Why Japan's Nomura didn't cut its target

Near-term risks include interest rates and uncertainty over AI investment
Expanded shareholder returns and other factors expected to drive a stock market revaluation

Global investment bank (IB) Nomura maintained its existing 10,000-point target for the KOSPI.

An electronic board displays domestic stock market information at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on the 6th, after the KOSPI plunged more than 8% shortly after opening, triggering a circuit breaker. Photo by Kang Jinhyung.

In a report titled "Korea's market reform moving to next phase" on November 5, Nomura said that despite the recent decline in stock prices, the drivers of growth—corporate earnings and expanded shareholder returns—remained intact. It also cited the KOSPI's low valuation as a factor enhancing its investment appeal, noting that its projected 2027 price-to-earnings ratio (PER) was just 3.8 times and its price-to-book ratio (PBR) just 1.1 times. Cindy Park, head of Nomura's Korea Research Center, said, "The Korean stock market has been oversold, but its fundamentals appear solid." However, Nomura set a target of 7,500–8,000 for the KOSPI over the next three months, saying volatility could persist in the short term amid uncertainty over interest rates and investment in AI data centers.

Nomura calculated its 10,000-point KOSPI target by applying a PER of 7.1 times to projected 2027 return on equity (ROE) of 31%. It expects AI investment to support earnings not only in memory and server components, but also in the nuclear power, power equipment and battery industries. It added that expanded corporate share buybacks, implementation of Commercial Act amendments, and more active shareholder engagement by institutional investors would also drive a market re-rating.

Nomura cited SK hynix's decision to suspend its review of an initial public offering (IPO) for Solidigm as a leading example of how minority shareholders' interests are increasingly influencing major corporate decisions. It also viewed companies' expanded shareholder returns positively. According to Nomura, KOSPI-listed companies have announced share buybacks worth KRW 77.6 trillion so far this year, of which KRW 62 trillion is slated for cancellation—3.5 times last year's amount.

Nomura said that high interest rates, oil prices, the timing of AI data center construction, the scale of capital expenditure, and uncertainty over funding sources could weigh on the stock market in the short term. However, regarding concerns about U.S. regulations on data centers, it forecast that even if permitting reviews become stricter, projects are more likely to be delayed or relocated than canceled outright. It therefore expects the impact on the memory industry after 2028 to be more limited than the market fears.

Its preferred stocks were Samsung Electronics, SK hynix, LG Energy Solution, Samsung Electro-Mechanics, Celltrion, Hyundai Mobis, Doosan Enerbility, Samsung SDS, and HD Hyundai Marine Solution.

This content was produced with the assistance of AI translation services.