Korea Strategy: Slower EPS estimate upgrades, Stronger macro headwinds — But risk aversion seems overdone

UBS lowered its 12M KOSPI target by 9% to 8,000 (7x NTM PE) from 8,800, reflecting higher interest rates, a stronger KRW and rising oil prices, with upside/downside of 9,200/5,100. We continue to forecast solid 2026/27E EPS growth of +256%/+38% (vs consensus +279%/+36%), but consensus EPS revisions, a key driver of market performance, have turned negative (-0.5% MoM in Sep vs +14% in H126) as memory-led EPS estimate upgrades fade, and the market may remain largely rangebound until Q3/Q4 earnings seasons provide greater clarity. The 10Y KTB yield has risen to 4.5% from 3.4% at the start of the year, the BOK has raised rates twice since July with another 25bp hike expected in Dec, oil prices have climbed above US$100/bbl and KRW has appreciated 11% since June. We favor Value/Quality over Growth, preferring memory value (SEC, SKH), early-cycle industrials and quality with return, adding S-Oil as most preferred and Naver as least.