Morgan Stanley upgrades South Korea's stock market rating to overweight, citing 36% upside after leverage clearing

Odaily News - Morgan Stanley has upgraded South Korea's stock rating from equal-weight to overweight, stating that the recent "leverage clearing" provides a better entry point for investors to participate in artificial intelligence trades and industrial supercycle themes. Strategists including Daniel K. Blake wrote in a report that with the significant unwinding of crowded trades and leveraged positions, the KOSPI index still has 36% upside to its target of 9,000 points. The index fell as much as 5.5% on Monday, following a record 18% surge last Friday.

Analysts noted that the recent selloff was "mainly driven by technical factors," adding that "the deleveraging process for leveraged ETFs, hedge fund leverage, and retail margin trading is more than halfway through." Morgan Stanley expects the KOSPI index to fluctuate within a range of 5,500 to 10,500 points in the short term, and believes that Samsung Electronics and SK Hynix will provide valuation support for the market. Stocks in sectors such as industrials, defense, and financials are expected to benefit from positive catalysts. (Jin Shi)