[MarketING] 'Cheer Up' on US Semiconductor Index Rise... Samsung and Hynix Bought by Institutions for 5 Consecutive Days

KOSPI Turns Down in One Day
Impact of Foreign and Institutional Profit-Taking Sales

On the 5th, the KOSPI opened at 2,268.20, up 12.22 points (0.54%) from the previous trading day, as employees worked in the dealing room of Hana Bank in Jung-gu, Seoul. The won-dollar exchange rate started at 1,271.0 won, down 0.7 won from the previous trading day. Photo by Hyunmin Kim kimhyun81@

The KOSPI opened slightly lower. This is interpreted as fatigue following three consecutive days of gains and profit-taking by foreign and institutional investors. Despite the index decline, semiconductor stocks continue their upward streak due to expectations of industry recovery.

KOSPI Opens Lower Amid Foreign and Institutional Selling

As of 10:15 a.m. on the 24th, the KOSPI stood at 2,403.52, down 20.96 points (0.86%) from the previous day. The KOSDAQ rose 3.93 points (0.48%) to 816.12.

Foreign and institutional selling is pulling the index down. On the day, foreign investors sold 116.8 billion KRW and institutions sold 192.7 billion KRW in the KOSPI market.

Despite the weak index, semiconductor stocks are maintaining their recent strong momentum. Samsung Electronics is trading at 62,500 KRW, up 0.32% from the previous day, marking the fourth consecutive day of gains. It rose nearly 1% early in the session, approaching 63,000 KRW, but the gains narrowed. SK Hynix initially rose over 1%, recovering the 90,000 KRW level, but then turned downward.

Expectations of an industry bottom are fueling the recent rise in semiconductor stocks. In the U.S. market yesterday, the Philadelphia Semiconductor Index rose 2.67% on hopes of an industry bottom. Seosangyoung, a researcher at Mirae Asset Securities, explained, "Following NVIDIA's annual developer conference (GTC), several investment banks have issued positive evaluations, boosting NVIDIA's stock. Expectations of an industry bottom have also lifted Micron's stock, contributing to the Philadelphia Semiconductor Index's 2.67% gain, which is positive for the domestic market." On the 23rd (local time) in the U.S. market, NVIDIA rose 2.73%, AMD 2.77%, and Micron 5.45%.

Institutional buying has steadily flowed into semiconductor stocks recently, supporting the upward trend. Institutions have purchased Samsung Electronics for five consecutive trading days and SK Hynix for six consecutive days. Foreign investors have also consistently bought Samsung Electronics. Kim Jihyun, a researcher at Kiwoom Securities, said, "Since the detailed contents of the U.S. Semiconductor Act were disclosed, the market has interpreted it as less concerning than expected, leading to foreign buying in the electrical and electronics sector, creating a favorable supply-demand environment. As the Q1 earnings season approaches, whether the semiconductor sector rebounds will determine the upper limit of the index."

The recent strength in semiconductor stocks is seen as reflecting expectations of industry improvement. Ko Youngmin, a researcher at Shinhan Investment Corp., analyzed, "The supply reduction effect by semiconductor manufacturers began in Q1 this year and is expected to gradually expand through the second half of this year and the first half of next year. Even if the macroeconomic bottom confirmation is delayed, considering the supply reduction effect, a sharp deterioration in the semiconductor industry is unlikely." He added, "The price bottom of the 2022-2023 semiconductor cycle is expected to have been in early January, and the cycle turning point will likely be in Q3-Q4 this year, ahead of the macroeconomic inflection point."

First Half Earnings May Be Weak, but Buying on Dips Is Effective

As the Q1 earnings announcements approach, semiconductor stocks are expected to report weak results.

According to financial information provider FnGuide, Samsung Electronics' Q1 operating profit consensus is 1.5028 trillion KRW, expected to decrease by 89.36% year-over-year. SK Hynix is forecasted to record an operating loss of 3.4864 trillion KRW in Q1, turning to a deficit.

However, since a recovery is expected in the second half, buying on dips is considered effective. Wi Minbok, a researcher at Daishin Securities, said, "Although the semiconductor sector is expected to see a significant annual earnings decline this year, as a cyclical industry, stock prices tend to lead the industry. The stock price in the second half of this year will reflect expectations for a sharp industry improvement in 2024 due to supply shortages." Wi changed his investment strategy on semiconductor stocks from "buy on dips" to "active buying," saying, "You should buy semiconductor stocks when the industry is at its worst."

Ko added, "In the short term, there may be stock price volatility depending on the monthly macroeconomic indicator releases, but considering that the bottom has already formed and the semiconductor inflection point is likely earlier than the macroeconomic one, the stock price bottom is likely to trend upward."

Kim Kwangjin, a researcher at Hanwha Investment & Securities, said about Samsung Electronics, "The current stock price is formed at about 1.2 times the price-to-book ratio (PBS) based on this year's expected book value per share (BPS), sufficiently reflecting the first half earnings slowdown. Now, attention should focus on the direction of earnings improvement expected from Q2."