JP Morgan sees Kospi hitting 15,000, flags stocks to buy — and avoid

JP Morgan has outlined a scenario in which the Kospi could climb as high as 15,000, while also identifying which South Korean stocks to favor — and which to avoid.

According to the financial investment industry, the US investment bank said in a report published Wednesday that its 12-month Kospi targets are 12,500 in a base-case scenario, 15,000 in a bull case and 8,000 in a bear case.

JP Morgan characterized the South Korean market as a "winner-keeps-winning" environment, saying the rally has been driven by stocks with strong momentum.

Among its preferred picks, the bank highlighted Samsung Electronics, Samsung Electro-Mechanics, Hyundai Motor and Samsung Life, all of which have posted notable share price gains this year. Hanwha Aerospace, KB Financial Group, SK Corp, HD Hyundai Electric, APR and Isupetasys also made the recommended list.

Kakao, by contrast, was placed among the bank's least-preferred stocks. The company's shares have fallen more than 40 percent this year. Posco Future M and Hyundai Marine & Fire Insurance were also flagged as relatively unattractive investments.

JP Morgan said the current market environment favors concentrating on highly competitive stocks over broad diversification.

However, the bank noted that as capital increasingly concentrates in certain sectors, contrarian bets on relatively overlooked industries are worth considering. It said department stores, cosmetics, travel, securities and construction have yet to fully reflect the wealth effect from rising asset prices.

On the biotech sector, JP Morgan said excessive corrections have pushed valuations into undervalued territory, and that the discount on preferred shares relative to common shares has widened too far.

The bank was also upbeat on banking stocks, citing three tailwinds expected to materialize simultaneously: improved asset quality from rising asset prices, the possibility of Bank of Korea rate increases, and expansion of brokerage commissions.

Interest is growing in the potential for sector rotation even as the AI- and semiconductor-led bull run continues. Investors are watching whether buying interest will spread from existing market leaders to sectors that have lagged, with earnings improvement emerging as the key variable determining individual stock performance going forward.