Morgan Stanley has upgraded the rating of the South Korean stock market to "overweight," with a target price of 9,000 points

Morgan Stanley has upgraded the rating of the South Korean stock market to "Overweight," with a target price of 9,000 points, implying a 36% upside from the current level.

Morgan Stanley believes that the previous severe deleveraging is nearing its end, and the KOSPI valuation has fallen to historically low levels, providing investors with a more attractive entry point. Their data shows that hedge funds have completed about 75% of their deleveraging, leveraged ETFs have evaporated 70% from their peak, and the chip structure has significantly improved.

Shawn Kim, head of Morgan Stanley's Asia Technology team, pointed out three recent catalysts for South Korean chip stocks in the report.

First, capital expenditure. The capital management trends of Samsung Electronics and SK hynix are seen as the most important recent catalysts. The market is waiting for specific announcements from both companies regarding their "value enhancement" plans and capital returns, with the timing still unclear, but the expectations themselves have already formed a potential catalyst.

Second, HBM4 pricing. Samsung Electronics recently stated that HBM4 will account for about 60% of its total HBM sales by the end of next year. If HBM4 prices reach the market expectation of over $3 per Gb, it will positively catalyze overall DRAM pricing from 2026 to 2027.

Third, the iPhone 18 release cycle. The mobile segment still accounts for 30% to 40% of global DRAM demand and 25% to 30% of NAND demand. According to feedback from members of the Korean Apple supply chain (such as LG Innotek), Apple has a positive outlook on the iPhone 18 cycle, expecting a year-on-year shipment increase of 5% to 10%. The iPhone 18 will be released in September, with the first models being the Pro series (including Pro, Pro Max, and foldable), and if sales perform well, it will positively drive Samsung Electronics and SK hynix.