"Hanter Estimate" ends "Kimchi Discount"? JPMorgan sees South Korean stock market rising 50% in two years.

Is the era of "discounted kimchi" in the South Korean stock market coming to an end? This Friday, the Morgan Stanley strategy team released a research report stating that the benchmark Kospi index of the South Korean stock market may rise by over 50% in the next two years from its current level, reaching the 5000 points mark. The index closed at around 3176 points on Friday, up 32% year-to-date and approaching its historical high. The Morgan Stanley strategists predict that the Kospi index may trade in the range of 3200 to 3500 points for the remainder of this year. The Kospi index has become one of the best-performing stock indices globally this year. This optimistic outlook stems from Morgan Stanley's upgrade of South Korean stocks from neutral to overweight this week. The bank pointed out that South Korea's new president, Lee Jae-myung, is committed to initiating the "next stage of governance reform" and has pledged to raise the Kospi index to 5000 points during his five-year term. Lee Jae-myung also plans to address the long-standing "Korea Discount" issue that has plagued global investors. Market enthusiasm ignited by reform expectations During his election campaign, Lee Jae-myung set a target for the KOSPI index to reach 5000 points a significant increase from current levels, aiming to increase the valuation of local stocks and end the "Korea Discount" phenomenon. The "Korea Discount" refers to the unique phenomenon where international capital markets consistently undervalue South Korean listed companies compared to their global counterparts, due to investor concerns about governance flaws, complex chaebol structures, and policy risks, demanding higher risk premiums and depressing stock prices. "Now is the time to change everything... to make the market more attractive in the long term," Lee Jae-myung said during his visit to the Seoul Stock Exchange. An article by Wall Street See News mentioned that Lee Jae-myung recently visited the South Korean Stock Exchange, demonstrating his commitment to "drive the stock market to double growth." This visit is symbolic, as Lee Jae-myung is one of the few South Korean leaders to visit the exchange early in his term. Lee Jae-myung emphasized the need to crack down on market misconduct, stimulate companies to increase dividends through tax reforms, and better support investors. Foreign attitudes are cautious but highly interested Despite strong market performance, foreign buying remains relatively restrained. Morgan Stanley strategists noted, "Ironically, foreign buying this time is far less active compared to early 2024." However, strategists believe this reflects investors "seeking better entry points." They stated that global investors' interest in the South Korean market is growing, and the current relative calmness may be building momentum for future capital inflows. The strategists said, "As long as the reform process stays on track, we continue to recommend overweighting in any volatility. Any volatility in global/regional markets during the summer whether it's tariff concerns, slowing growth, or bond market fluctuations could quickly trigger buying."