[Initial Moment] The Betrayal of the Trusted Leading Stock

Samsung Electronics Stock Continues to Decline... Down Over 29% Since August
Retail Investors Buy on Dips Amid Sharp Price Drop... Margin Trading Also Increasing
Premature Margin Trading Should Be Avoided as Stock Decline Factors Remain Unresolved

Samsung Electronics' stock price slump is prolonging. After repeatedly hitting new lows, it eventually fell to the '50,000-won stock,' and on the 23rd, it even dropped to 57,000 won during trading hours. The current stock price is more than 33% lower compared to the intraday high of 88,800 won recorded in July.

[Image source=Yonhap News]

This year, the hopes of retail investors who expected to see the '100,000-won stock' were shattered. As of the end of June this year, the number of small shareholders of Samsung Electronics reached about 4.25 million. Small shareholders hold 67% of Samsung Electronics' total issued shares. It is literally a national stock. Additionally, Samsung Electronics is the leading stock in the domestic stock market. Its weight in the KOSPI exceeds 16%. Considering that the second-ranked SK Hynix holds about 6%, this is an overwhelming level.

As Samsung Electronics, the national stock and market leader, wavers, there is an uproar everywhere. Everyone you meet talks about Samsung Electronics. Some say they never imagined the stock would fall below 60,000 won after buying it in the 80,000-won range. Others complain that they set aside a fixed amount of their monthly salary to regularly buy Samsung Electronics shares but now regret not just putting the money in a savings account. There are also stories of parents who invested most of their retirement funds in Samsung Electronics and now sigh frequently.

Nevertheless, retail investors still seem unable to lose faith in Samsung Electronics. Foreign investors have consecutively sold Samsung Electronics shares for 31 days from the 3rd of last month to the 23rd of this month, breaking the record for the longest consecutive net selling. However, individual investors have absorbed most of the shares sold by foreigners. During this period, foreigners net sold 11.9 trillion won worth of Samsung Electronics shares, while individuals bought 11.4 trillion won worth. Some investors see the price drop as a buying opportunity and have increased 'debt investing' (borrowing to invest). Samsung Electronics' margin loan balance exceeded 1 trillion won for the first time this month. The margin loan balance represents the amount individual investors borrow from securities firms to buy stocks; a higher balance indicates more investors expect the stock price to rise and are borrowing to buy shares. While the margin loan balance was near 600 billion won in August, it rapidly increased after September and reached a record high of 1.0567 trillion won on the 14th of this month. Among retail investors, the term 'Obosa' has even emerged, meaning to buy when the first digit of Samsung Electronics' stock price shows 5.

Retail investors' low-price buying of Samsung Electronics is not new. Earlier, when the stock market crashed due to COVID-19 in 2020, individual investors actively bought at low prices to defend the stock price, known as the 'Donghak Ant Movement.' In March 2020, when the COVID-19 outbreak caused a market crash, Samsung Electronics fell below 50,000 won, becoming the '40,000-won stock,' but thanks to active buying by retail investors, it surpassed 80,000 won by the end of that year. From March to the end of that year, individuals bought about 6.7 trillion won worth of Samsung Electronics shares. During the same period, foreigners sold 2.7 trillion won and institutions sold 4.3 trillion won, but individuals absorbed most of the shares sold by foreigners and institutions, driving the stock price up.

Perhaps this experience is the background for current retail investors jumping into debt investing. Although the supply and demand situation may be similar, the reasons for the stock price decline differ, so it is uncertain whether Samsung Electronics can quickly recover its stock price as it did then. This is why retail investors' debt investing is concerning. At that time, the global stock market crashed due to concerns about an economic recession caused by the COVID-19 pandemic, but the recent decline in Samsung Electronics is due to internal issues, such as being excluded from the high-bandwidth memory (HBM) value chain, which gained importance amid this year's artificial intelligence (AI) boom, and a shock in third-quarter earnings. Although Samsung Electronics' stock price has fallen to historically undervalued levels, the timing for resolving the causes remains unclear, so rushing into low-price buying could result in losses. A cautious approach seems necessary.