[MarketING] Investor Sentiment Focused on Semiconductors Amid Deepening Wait-and-See Trend

KOSPI Moves Sideways
Samsung Electronics Earnings Shock, Foreign Investors Turned 'Burden'

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] As major events approach, the market is showing a strong wait-and-see stance. Samsung Electronics' earnings shock and the reversal of foreign investors are acting as burdens on the stock market. It is expected that the rise of semiconductor stocks and the continuation of foreign buying will depend on whether Samsung Electronics decides to cut production.

KOSPI fluctuates around the flat line... below the 2450 level

As of 10:20 a.m. on the 31st, the KOSPI was at 2444.96, down 5.51 points (0.22%) from the previous day. The KOSDAQ rose 0.34 points (0.05%) to 738.96. On this day, the KOSPI started down, then turned up, but fell again, fluctuating around the flat line. The KOSDAQ also started down, turned up, and remained around the flat line.

The poor performance of Samsung Electronics announced before the market opened and the weakness of semiconductor stocks in the U.S. stock market the previous day are interpreted as factors limiting the upward trend.

On this day, Samsung Electronics announced that its consolidated operating profit for last year was 43.3766 trillion won, down 15.99% from the previous year. Sales increased by 8.09% to 302.2314 trillion won, surpassing 300 trillion won in annual sales for the first time. The operating profit for the fourth quarter of last year was 4.3061 trillion won, down 68.95% 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 Samsung Electronics' quarterly operating profit has been in the 4 trillion won range. In particular, semiconductor operating profit plunged by more than 96.95% year-on-year to 270 billion won. Following the earnings shock, Samsung Electronics' stock price fell more than 1%, dropping to the 62,000 won range. Market attention is focused on whether Samsung Electronics will mention production cuts in the upcoming conference call.

Han Ji-young, a researcher at Kiwoom Securities, said, "Despite the shock in Samsung Electronics' preliminary Q4 results announced in early January, semiconductor stocks performed well due to not only a favorable macro environment but also expectations of rising memory prices from Samsung's production cut decision." She added, "Considering this, the domestic stock market's downside, which is currently under bearish pressure, may change depending on whether the production cut is materialized in Samsung Electronics' scheduled conference call."

The weakness of semiconductor stocks in the New York stock market the previous day was also a burden. Due to weak front-end demand and increased inventory, major companies such as Nvidia, AMD, Micron, and Applied Materials saw their stock prices fall by 2-4%. The Philadelphia Semiconductor Index also dropped 2.5%. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Concerns grew as major customers, including consumers and companies, delayed purchases while coping with inflation and rising interest rates, and inventory, an important indicator of semiconductor demand, increased more than threefold, reaching a supply volume of 3-4 months." He added, "In particular, the expected 30-50% sharp decline in sales of semiconductor equipment companies due to production and investment delays was also a burden."

Possibility of changes in foreign investors' movements following semiconductor stocks

The flow of semiconductor stocks is expected to influence whether foreign investors, who have led the KOSPI's rise with continuous buying, will continue their purchases.

Up to the previous day this year, foreign investors recorded a net purchase of 6.8456 trillion won in the domestic stock market, with 2.6394 trillion won in Samsung Electronics and 659.7 billion won in SK Hynix. Nearly half of the total net purchases were concentrated in semiconductors. On this day, they showed a selling trend of around 50 billion won in the KOSPI market, marking the first selling in 13 trading days.

A researcher said, "Considering the weight of semiconductor stocks in the domestic stock market, foreign investors' supply and demand, who have recorded aggressive net purchases in the KOSPI, could also be affected." He added, "Excluding mechanically inflowing passive demand, active demand could be influenced by the stock prices of major domestic semiconductor companies." Following Samsung Electronics on this day, SK Hynix will announce its Q4 and annual results tomorrow (the 1st).