Sold 8 Trillion Last Year, Bought Nearly 1 Trillion This Year
Attraction of Undervaluation and Expectations for Industry Improvement at Work
[Asia Economy Reporter Kwon Jaehee] Although Samsung Electronics announced fourth-quarter earnings that fell short of expectations, it rose to the "60,000 won stock" level thanks to foreign investors' buying spree. The foreign ownership ratio also surpassed the 50% mark for the first time in about seven months. Analysts say that the attractiveness of undervaluation and expectations for industry improvement since the first half of the year led to foreign buying. Accordingly, expectations for breaking through the "70,000 won stock" level are also growing.
According to the Korea Exchange, on the 13th, Samsung Electronics closed at 60,800 won, up 0.50% from the previous trading day. After hitting a low of 54,500 won intraday on January 3, Samsung Electronics' stock price steadily rose, closing at 60,700 won on the 6th, reclaiming the "60,000 won stock" status. The stock price has risen 9.95% so far this year.
The rise in Samsung Electronics' stock price was driven by foreign investors' buying. Except for two days this year, foreign investors bought Samsung Electronics shares for nine consecutive trading days from the 3rd to the 13th. During this period, foreign investors purchased a total of 953.368 billion won worth of Samsung Electronics shares. This was the top net purchase during the period. Compared to last year, when foreign investors sold 8.7148 trillion won worth of Samsung Electronics shares, this is a significantly smaller amount. However, the fact that foreign investors have been net buyers this year is also interpreted as a signal of a change in their position.
Samsung Electronics' foreign ownership ratio also surpassed 50% for the first time in about seven months. When Samsung Electronics was at the "50,000 won stock" level in June last year, the foreign ownership ratio fell below 50% for the first time in six years since April 28, 2016 (49.59%).
Despite Samsung Electronics' earnings shock, foreign investors bought the stock due to its undervaluation appeal and expectations for semiconductor industry improvement. The recently announced fourth-quarter earnings of Samsung Electronics were at an "earnings shock" level. Samsung Electronics' fourth-quarter operating profit was 4.3 trillion won, down 69% from the same period last year. This is the first time in over eight years since the third quarter of 2014 (4.06 trillion won) that the quarterly operating profit fell below 5 trillion won. However, recently, foreign-based Citi Securities published a report including the possibility of Samsung Electronics revising its supply policy and industry improvement outlook, which is interpreted as having positively influenced foreign investors' sentiment. Domestic securities firms also view the earnings shock as already anticipated and expect stock price increases along with demand recovery.
Dongwon Kim, a researcher at KB Securities, analyzed, "The poor fourth-quarter earnings are rather an opportunity," adding, "Semiconductor stock prices reflect earnings and industry conditions six months in advance, so the poor fourth-quarter earnings have already been factored in, and currently, the market seems to be reflecting earnings and industry conditions expected in July."
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