The KOSPI, which has run nonstop, has finally opened the 5,000-point era. Market attention is focused on whether "O-cheonpi" will take hold as a sustainable new floor (support line) or whether a steep pullback from short-term overheating will begin.
Global investment banks (IBs) and major domestic securities firms are pouring out "rosy" outlooks, even mentioning the possibility of reaching the 6,000 level, but on the ground there are growing warnings that the continuity of foreign inflows and the direction of the U.S. Federal Reserve's (Fed) currency policy must be assessed coolly.
◇ 5,000 is the "new normal"… a rally led by earnings growth
In global IBs and the securities industry, the prevailing view is that this rally marks the start of a "new normal." JPMorgan presented 5,000 as its base scenario at the end of last year and assessed that 6,000 could be possible depending on conditions. Macquarie also said, "Strong earnings growth, abundant liquidity, and stock market–friendly government policies are aligning, allowing the index to approach the 6,000 level." Goldman Sachs likewise lent support by formalizing 5,000 as this year's forecast.
The key that IBs commonly cite as grounds for the index's rise is that this bull market is based on "earnings growth." In a recent report, Goldman Sachs analyzed, "Strong upward revisions to earnings are appearing, centered on technology sectors including semiconductors," adding, "This upswing has been reaffirmed as an earnings-based rally rather than a liquidity rally."
It explains that capital expenditure (CAPEX) expansion sparked by the spread of artificial intelligence (AI) is pushing up the average selling price (ASP) of memory, and coupled with supply shortages, structural changes are emerging. Reflecting this trend, JPMorgan recently raised its target price for Samsung Electronics to 200,000 won and for SK hynix to 1,000,000 won.
Expectations for resolving the chronic "Korea discount" are also a powerful backing for the 5,000 era of the index. Goldman Sachs said, "The Korean stock market is enjoying the country-specific catalyst of governance reform," and assessed that with strengthened shareholder-return policies such as cuts to dividend income tax and the retirement of treasury shares, the current phase of the Korean stock market is similar to the early stage of Japan's 2020 stock rally.
In particular, as The National Assembly's Legislation and Judiciary Committee on the 23rd resumed deliberations on an amendment to the Commercial Act centered on mandating the retirement of treasury shares, there is a view in the market that legislation to enhance shareholder value has entered the final countdown.
An analysis also finds that valuation pressure is not great. The KOSPI's 12-month forward price-earnings ratio (PER) is 10.4 times, only slightly above the 20-year average (10 times). The 12-month trailing price-to-book ratio (PBR) is 1.65 times, above the long-term average (1.18 times), but the explanation is that many corporations are still trading cheaply relative to asset.
◇ Domestic target at 5,600… stocks overheated, but still 38% upside potential
Hana Securities also recently raised the KOSPI's upper band to the 5,600 level. This figure is based on strong earnings growth visibility in the semiconductor sector led by Samsung Electronics and SK hynix. Lee Jae-man, a Hana Securities researcher, acknowledged some signs of overheating at current price levels, but said, "With the U.S. tech sector's CAPEX growth rate forecast reaching 27%, and with rising semiconductor prices coupled with a high exchange-rate environment, earnings growth visibility is very high."
Hana Securities assessed the current phase as similar to the "super cycle" of 2016–2018. Applying the then price-earnings-to-earnings growth ratio of 1.08 times to the current cycle, it calculated that the projected 189% increase in semiconductor net profit from 2024 to 2026 could translate into a 204% rise in stock prices. Despite prices already having risen about 143%, it analyzed that there is still 61% additional upside potential. In particular, considering the weight of the semiconductor sector, which accounts for 38% of the KOSPI's market capitalization, it projected that the overall index could climb about 23% further from the current level to reach the 5,600 level.
◇ Market caution persists… "We must weigh the 'quality' of flows and currency policy"
But alongside the rosy outlooks, there is no shortage of caution. In a recent report, Société Générale S.A. noted, "The KOSPI delivered a high return of 80% in 2025, but in terms of flows the participants were extremely limited," adding, "Only domestic institutions were net buyers, while foreigners and individuals maintained a net selling stance." In particular, it assessed that even domestic institutional buying has qualitative limits in flows, as it is concentrated more in derivatives hedging demand by securities firms and market makers than in long-term investment demand.
Currency policy variables are also cited as a key risk. Lee Eun-taek, a KB Securities researcher, said, "In a bull market, the decisive variable dividing corrections and rallies is currency policy rather than fundamentals," and advised, "If the U.S. economic rebound becomes clear and dollar weakness accelerates, the end of the U.S. Federal Reserve's rate-cut cycle could come to the fore and the stock market could enter a correction phase." Accordingly, market attention is focused on the U.S. Federal Open Market Committee (FOMC) rate decision scheduled for the 27th–28th (local time).