Investing.com — South Korean stocks are trading at their cheapest valuations on record despite an 80% rally this year, as corporate earnings, led by AI-driven memory chip demand, have outpaced gains in share prices, according to Bloomberg.
The is trading at just 6.4 times forward earnings, below levels seen during the 2008 global financial crisis, after consensus earnings estimates for index constituents rose for a 17th consecutive month. Strong profits at and have been the primary drivers of the rally.
Rather than being fueled by expanding valuations, the market’s advance has largely reflected stronger-than-expected earnings growth. Analysts expect Kospi forward earnings per share to rise about 170% this year, marking the largest annual increase since Bloomberg began tracking the data in 2006.
Even after outperforming many global markets, Korean equities continue to trade at a steep discount to peers. The Kospi’s forward price-to-earnings ratio is roughly one-third that of Taiwan’s Taiex, highlighting what some investors see as an attractive entry point.
Not everyone is convinced the valuation gap will close. Some market participants argue that investors remain skeptical about whether the AI-driven surge in memory chip demand can extend beyond the industry’s traditional boom-and-bust cycles. Others warn that rising memory prices could eventually dampen demand as hyperscale technology companies seek to optimize spending.
Additional risks include Samsung and SK Hynix expanding production capacity, which could pressure margins if supply outpaces demand, as well as intensifying competition from Chinese memory chip makers. Some investors also point to elevated price-to-book and PEG ratios as evidence that leading Korean chip stocks are no longer as inexpensive as headline earnings multiples suggest.
Despite those concerns, some analysts believe expected catalysts, including a potential U.S. listing for SK Hynix, could help narrow the valuation gap with global peers and support further gains if earnings momentum remains intact.