Individual Investors Net Buy Over 2 Trillion Won Since Last Month
Preference for Stability Amid COVID-19... Strong 3Q Earnings Boost Investment Sentiment
Strong Mobile Earnings Expected... Benefiting from China-US-India Conflicts
[Asia Economy Reporter Minwoo Lee] Individual investors have been steadily buying Samsung Electronics, the 'blue-chip' stock of the domestic stock market. Amid growing uncertainty due to the resurgence of COVID-19, they appear to have chosen a stable investment. Additionally, expectations of strong third-quarter earnings have stimulated investor sentiment.
According to the Korea Exchange on the 7th, individual investors have net purchased Samsung Electronics shares worth 2.0485 trillion KRW from last month through the 4th of this month. On August 31, they bought shares worth 553.6 billion KRW in a single day. This is the largest single-day net purchase since March 11, when the stock market plunged due to the economic slowdown caused by COVID-19 (675.9 billion KRW net purchase). Since last month, individual investors have only net sold Samsung Electronics shares on five trading days. They have continued net buying for 11 consecutive trading days since August 19. This contrasts sharply with July, when they net sold 1.9682 trillion KRW.
It is analyzed that the search for a stable investment amid stock market uncertainty has stimulated the buying trend. The domestic stock market, which had steadily risen since June, has experienced increased volatility since last month. After reaching a yearly high of 2,458.17 on August 13, it fell for four consecutive trading days to 2,274.22. Since then, it has fluctuated around the mid-2300s. This is interpreted as renewed concerns over an economic downturn due to the resurgence of COVID-19. In this situation, individual investors sought stable investment options. The buying spree in Samsung Electronics preferred shares is also seen in the same context. From last month through the 4th, individuals purchased 557.5 billion KRW worth of Samsung Electronics preferred shares. Except for two days (August 6 and 26), net buying occurred every day during this period.
Hwang Sewoon, a research fellow at the Korea Capital Market Institute, explained, "In the past, individuals often made 'blind investments' with the vague belief that Samsung Electronics would never fail, but the recent trend is somewhat different. Individuals who have developed investment capabilities to nimbly assess various themes and promising growth stocks appear to be buying Samsung Electronics as part of stable risk management."
Expectations of strong third-quarter earnings also supported the buying trend. According to financial information provider FnGuide, Samsung Electronics' consensus forecast for third-quarter earnings this year is sales of 62.1818 trillion KRW and operating profit of 9.0926 trillion KRW. Operating profit is expected to increase by about 16.9% compared to the third quarter of last year. Due to delayed new product launches by overseas competitors in the third quarter, Samsung Electronics is expected to reclaim the top spot in smartphone sales, making an earnings surprise possible. Daishin Securities forecast Samsung Electronics' third-quarter smartphone sales at 80.59 million units, a 49.1% increase from the previous quarter. Operating profit from Samsung Electronics' smartphone division is expected to rise 61.1% quarter-on-quarter to 3.14 trillion KRW, the highest since the first quarter of 2018.
Park Kangho, a researcher at Daishin Securities, analyzed, "There is a base effect compared to the sluggish second quarter due to COVID-19, and Samsung Electronics will gain a windfall profit as Chinese Huawei's sales have been sluggish due to conflicts between China and the US, and China and India. Profitability will improve with premium smartphone sales such as Galaxy Note20 and Galaxy Fold2, along with increased sales of the Galaxy A series."
SK Securities raised Samsung Electronics' target price to 80,000 KRW. On July 31, Hana Financial Investment set the target price at 80,000 KRW for the first time ever, but due to subsequent stock price weakness, most securities firms set it in the low 70,000 KRW range. Now, about a month later, 80,000 KRW has been proposed again. Kim Youngwoo, a researcher at SK Securities, predicted, "The biggest change in the untact economy is the reduced role of in-store sales staff, so Samsung Electronics' home appliances and TV sales, which have strong brand power and a wide range of products at various price points, will significantly exceed market expectations."
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