Foreign Investors
Foreign and institutional investors in the Korean stock market are moving in opposite directions with regards to Samsung Electronics. The former have recently sold their Samsung Electronics shares in large quantities out of concerns over the company’s growth potential in the global smartphone market. In response, local brokerage firms are retorting that such bear raiding is groundless. According to the Korea Exchange(KRX),institutional investors’ and pension funds’ straight purchase of shares amounted to 174.7 billion won and 96.9 billion won this month, respectively. Meanwhile, their foreign counterparts’ net selling reached 790.5 billion won during the same period.
On June 10, foreign investors dragged down the KOSPI index by selling Samsung Electronics shares worth 231.9 billion won in total. The decline was triggered by a JP Morgan report that stated Samsung Electronics’ business profit ratio would fall in the latter half of this year due to lower-than-expected sales of the Galaxy S4. “One of the long-term investment funds owned by foreign investors has reduced the ratio of Samsung Electronics out of concerns over its mobile phone business prospects,” said a local analyst, adding, “However, the selling spree seems to have more to do with intensifying market competition and the growth limit of the overall smartphone market rather than problems with the handset manufacturer itself.”
Local mobile phone component manufacturers agreed with the negative view, stating that Samsung Electronics’ smart phone business lost steam in the second quarter of this year. “It can’t be denied that the Galaxy S4 is enjoying less popularity than previous models, though official statistical data has yet to be announced,” said an industry insider. He went on, “It is said that Samsung is trying to release the Galaxy Note 3 earlier than scheduled in a bid to make up for the damage.” JP Morgan, in this context, lowered its sales forecast for the product for this year from 80 million units to 60 million following a survey of component suppliers.
However, Korean securities companies remain optimistic about prospects. “Sales of the Galaxy S4, which are estimated at approximately 12 million and 10 million units in May and June, respectively, will meet the expectations of many in the end, dispelling the worries of some investors,” said Roh Geun-hwan, a research analyst at Korea Investment & Securities, adding, “The figure is likely to top eight million a month during the third and fourth quarters of this year.” KDB Daewoo Securities estimated that Samsung Electronics’ annual smartphone shipments for this year would increase 48.5% from a year earlier to 320 million units.
Under such circumstances, the stock price of Samsung Electronics is moving sideways. Daiwa Securities and Morgan Stanley are taking a net buying position, unlike Merrill Lynch, CLSA and UBS. Local pension funds, which purchased 120 billion won worth of stocks during the recent correction period, sold dozens of billions of won worth of shares yesterday. However, institutional investors are continuing to buy the shares.
“The stock price is expected to decide on its direction depending on various factors, including what Apple will do in the future, in addition to Samsung’s own business performance for the second quarter,” said an industry source. He continued, “For the time being, the stock price is likely to show no rapid increase or decrease with investor groups having different outlooks.”