Korean stocks trade at cheapest ever
South Korea’s stock market is staging one of the world’s most dramatic rallies this year, yet valuations have never been cheaper. The Kospi has climbed roughly 80 per cent in 2026, touching a series of record highs, but analysts have been raising earnings forecasts even faster — pushing the benchmark’s forward price-to-earnings ratio to just 6.4 times, a level below the trough seen during the 2008 global financial crisis. A recent sell-off tied to fresh doubts about the artificial intelligence trade has compressed valuations further, leaving investors to decide whether record cheapness signals a buying opportunity or a market that is already pricing in the end of the memory boom.
A Rally Built on Earnings, Not Multiples
Unlike most bull markets, Korea’s surge has not been driven by investors paying higher multiples for stocks. Instead, corporate earnings have risen far more than anyone expected. Consensus estimates for Kospi companies have increased for 17 consecutive months — the longest streak of upgrades in more than nine years — as memory-chip prices soar on demand from global technology firms racing to build AI infrastructure.
“Good buy or not really depends on individuals’ portfolios,” said Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore. “If one is not exposed much to these names, it is a great time to get in to provide the growth component for the portfolio tied into the AI theme. Earnings are robust and still forecast to be strong.”
Despite outperforming global peers, the Korean index remains deeply discounted relative to other chip-heavy indexes. Its price-to-earnings ratio is one-third the current multiple of Taiwan’s Taiex, which also boasts a large semiconductor sector.
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The Memory Cycle and Valuation Debate
The $4.3 trillion Korean market has long suffered from what analysts call the “Korea Discount” — depressed valuations caused by corporate governance issues and the historically cyclical earnings of Samsung Electronics and SK Hynix, which together account for more than half of the benchmark. Some market pundits argue that AI is creating a new demand paradigm that breaks the typical boom-and-bust memory cycle, but the index’s low price-to-earnings multiple suggests many investors remain unconvinced.
The numbers send mixed signals.
Forward earnings per share estimates for the index are up roughly 170 per cent this year — the largest annual increase in data going back to 2006. Yet the same companies that are minting money today face a familiar risk: capacity additions by the two chip giants to address the supply crunch could squeeze margins when demand eventually slackens, as it always has in previous cycles.
Charu Chanana, chief investment strategist at Saxo Markets, noted that cheapness alone is not a reason to buy.
“Korea needs proof that the memory super-cycle still has legs,” she said.
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“I’m worried this quarter a lot of hyperscalers will still spend big but start talking about how they are optimising costs, and that’s bad news for memory because it means high prices are killing demand.”
Jason Minsang Kam, head of active equity management at Kyobo Life Insurance in Seoul, called the earnings surge “unprecedented” but warned of “extreme volatility.” He said he is avoiding Korean chipmakers for now because of the high cyclicity of their earnings.
The surge in memory prices is expected to last another year or so, but that timeline may shorten if supply additions come online faster than anticipated. On the other hand, a potential US listing for SK Hynix could help close its valuation gap with rival Micron Technology. The competitive threat from Chinese firms such as ChangXin Memory Technologies adds another layer of uncertainty.
Given the difficulty of forecasting memory earnings, some investors argue that the price-to-earnings ratio is not the best gauge. Korea’s price-to-book ratio has climbed above two times for the first time this year, undermining the cheapness argument when measured by assets. Keith Bortoluzzi, managing director at Singapore-based Impactfull Partners, said the two chipmakers are “not screaming cheap anymore” based on PEG ratios, which adjust price-to-earnings for growth. “Share prices might hold steady for another six months, but they are unlikely to climb much higher,” he added.
