South Korean equities remain attractively valued despite a powerful 160% rally since 2024, with Macquarie analysts arguing the surge is fundamentally supported by earnings momentum and liquidity. The firm projects the KOSPI index could reach 8,000 by 2026, driven by strong profit growth, ample liquidity, and government policies encouraging equity investment.

Memory chipmakers form the backbone of this bullish outlook. Samsung Electronics and SK Hynix are expected to generate roughly 52% of total net profits in 2026 and account for about 90% of profit increases. Analysts warn the industry faces its most severe memory supply crunch on record, with no easing expected for two to three years as AI demand absorbs available supply.

The market trades around 9x 2026 earnings while the Korea coverage universe is projected to deliver 114% EPS growth in 2026. This disconnect between valuations and profit growth suggests the rally has been driven by earnings rather than multiple expansion. Beyond semiconductors, Macquarie favors neo-industrial exporters including defense, shipbuilding, and power equipment sectors that benefit from geopolitical tensions and limited global competition.