Morgan Stanley Upgrades South Korean Stocks to Overweight

Morgan Stanley upgraded South Korean stocks to overweight, forecasting a 36 percent upside with a target of 9,000 for the Kospi index. Strategists led by Daniel K Blake noted that a recent leverage washout, which saw the index fall more than 30 percent from its June peak, has established a more favorable entry point for the industrial super-cycle and artificial intelligence trade.

The bank attributed the market rout to concentrated index weightings and single-stock leveraged exchange-traded funds. In response to this volatility, South Korean regulators are planning to limit retail involvement in leveraged products by capping portfolio exposure. Morgan Stanley expects Samsung Electronics Co. and SK Hynix Inc. to provide valuation support for the index.

In other regional shifts, the bank upgraded Thai equities to overweight based on energy security themes and AI capital expenditure. Conversely, Morgan Stanley downgraded Australian equities to underweight, citing tax reforms and interest rate hikes.