[Beginner's Guide to Stock Investing] Why Did Samsung Electronics and Hynix Stock Prices Rise Despite 'Earnings Shock'?

Editor's Note[Joorini Guide] is a smart investment guide for 'Joorini (stock + beginner)'. We will kindly and easily explain stock stories that are unfamiliar to Joorini.

[Asia Economy Reporter Kwon Jaehee] The Q4 earnings of Samsung Electronics and SK Hynix have been announced.

As expected, the earnings were not good.

However, the stock prices actually rose.

Generally, stock prices need to be supported by earnings to rise.

How should we interpret the stock price rising despite the earnings shock?

Record Cold Wave in Semiconductors

'Record Cold Wave in Semiconductors'

You have probably seen this phrase a lot in recent economic articles.

In fact, Korea's two semiconductor giants, Samsung Electronics and SK Hynix, both recorded 'earnings shocks'.

SK Hynix announced on the 1st that it posted an operating loss of 1.7012 trillion KRW in Q4.

This is the first deficit in 10 years since Q3 2012.

Sales also dropped 38% year-on-year to 7.6986 trillion KRW.

Samsung Electronics also saw its Q4 operating profit fall 68.95% year-on-year to 4.3061 trillion KRW.

This is below market expectations, and it is the first time in 8 years since Q3 2014 (4.06 trillion KRW) that Samsung's quarterly operating profit remained in the 4 trillion KRW range.

Sales recorded 70.4646 trillion KRW, down 7.9% year-on-year.

Stock Prices Rise Despite Poor Earnings... Why?

On January 31, when Samsung Electronics announced its earnings, the stock price closed at 61,000 KRW.

Afterwards, on the 1st it closed at 61,800 KRW, on the 2nd at 63,500 KRW, and on the 3rd at 63,800 KRW, continuously closing higher.

SK Hynix, which announced earnings on the 1st, also closed at 91,400 KRW, up 3.28% from the previous trading day, and the next day the stock price rose to a high of 94,900 KRW.

Despite poor earnings, stock prices rose.

The securities industry widely believes that since Samsung Electronics and SK Hynix's earnings confirmed the semiconductor bottom theory, a rebound will follow.

KB Securities analyst Kim Dongwon said, "Because semiconductor stock prices reflect the industry conditions more than 6 months in advance, Samsung Electronics' stock price is expected to form a bottom in Q1, the worst period for the industry."

In fact, looking at foreign investors' net purchases in the domestic stock market in January alone, they bought 2.2221 trillion KRW worth of Samsung Electronics and 632.3 billion KRW worth of SK Hynix.

This means that about 45% of the total net purchases of 6.3704 trillion KRW in the KOSPI market by foreigners in January were invested only in semiconductors.

"Buy on Rumors, Sell on News."

If you are a stock investor, you have probably heard this saying.

"Buy on rumors, sell on news."

This is also related to the fact that Samsung Electronics and SK Hynix's stock prices rose despite the Q4 earnings shock.

Just as stock prices rise when bad news is confirmed, there are cases where stock prices fall even when good news is confirmed.

A typical example is stocks related to North Korea rising on expectations of inter-Korean cooperation but falling when news is announced.

Stock prices have the characteristic of reflecting the future in advance.

It may be hard to understand logically, but it is good to remember that this is common sense in the stock market.

We support the wise investments of all Joorini today as well, and conclude this article.

This article is from [Joorini Guide], published weekly by Asia Economy. We explain stock-related financial news as well as difficult economic stories in an easy and friendly way so that stock beginners can understand. By clicking subscribe, you can receive articles for free.

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