Bucking the trend and issuing a bullish call: Morgan Stanley upgrades its rating on South Korean stocks to "Overweight", targeting the 9,000 level.

Morgan Stanley upgraded its rating on South Korean equities to Overweight, setting a target of 9,000 points, implying 36% upside from current levels. The firm noted that the previous sharp deleveraging cycle is nearing its end, with KOSPI valuations hitting historic lows and presenting a more attractive entry point for investors. Its data shows hedge funds have completed roughly 75% of their deleveraging, while leveraged ETF assets have shrunk by 70% from their peak, leading to a notable improvement in shareholding structure. Shawn Kim, head of Morgan Stanley’s Asia Technology Team, outlined three near-term catalysts for South Korean chip stocks in the report: 1. Capital expenditure: The capital management moves of Samsung Electronics and SK hynix are seen as the most important near-term catalyst. The market is awaiting specific announcements from the two firms on their "value enhancement" plans and capital returns; timing remains unclear, but the expectation itself acts as a potential catalyst. 2. HBM4 pricing: Samsung Electronics recently stated HBM4 will account for around 60% of its total HBM sales by the end of next year. If HBM4 prices hit market expectations of over $3 per Gb, it will provide a positive boost to overall DRAM pricing in 2026 and 2027. 3. iPhone 18 launch cycle: Mobile devices still make up 30% to 40% of global DRAM demand and 25% to 30% of NAND demand. According to feedback from South Korean Apple supply chain members including LG Innotek, Apple holds a positive outlook on the iPhone 18 cycle, projecting year-over-year shipment growth of 5% to 10%. The iPhone 18 is set to launch in September, with the first batch of models being all Pro series (including Pro, Pro Max, and foldable variants). Strong sales would provide a positive tailwind for Samsung Electronics and SK hynix.