Thanks to strong foreign buying, Korea Composite Stock Price Index (KOSPI) bellwether, Samsung Electronics, broke its own records in the foreign purchases, foreign holdings and market capitalization, leading the Korean stock market. Its stock price is also about to surpass the highest closing record of 1,576,000 won (US$1,383.06) in 2013 amid a continuous new record high rally. However, there are concerns that investors should be cautious about the illusion effect in the KOSPI caused by the excessive tipping effect for Samsung Electronics.
Samsung Electronics saw its share price reach 1,547,000 won (US$1,357.61) on July 21, up 0.45 percent from a day earlier, recording a new high in 52 weeks again. It is in stark contrast to the fact that the KOSPI has remain weak for three days in a row after reaching over the 2,020 level on the 18th.
With the recent upturn, the market capitalization of Samsung Electronics surpassed 220 trillion won (US$193.07 billion) as of the same day. The figure is 5 trillion won (US$4.39 billion won) higher than the total market capitalization of the KOSDAQ worth 215.18 trillion won (US$188.84 billion). It is also higher than the combined market capitalization of companies, which ranked second to ninth in terms of market capitalization in the KOSPI including Korea Electric Power Corp. (KEPCO), Hyundai Motor and AmorePacific, worth 208.62 trillion won (US$183.08 billion). Accordingly, Samsung Electronics accounted for 17.2 percent of KOSPI's total market cap, the highest figure in 16 months after posting 17.52 percent on March 18 last year.
Offshore investors are leading Samsung Electronics’ upward trend. They bought a total of 702.7 billion won (US$616.67 million) of Samsung Electronics’ shares as of the 21st this month. The figure accounts for more than 24 percent of a net foreign purchase worth 2.89 trillion won (US$2.54 billion) in the KOSPI during the same period. It means that Samsung Electronics plays a role as “black hole” which absorbs the supply and demand of foreign investors in the domestic market. The rate of foreign holdings of Samsung Electronics’ stocks also skyrocketed to 50.74 percent, hitting a record high for the year.
Market analysts said that the there is no bellwether, except for Samsung Electronics, to lead the domestic stock market, and it caused the tipping effect for Samsung Electronics. Kim Hak-kyun, head of the investment and strategy division at Mirae Asset Daewoo, said, “As the automobile industry, which is considered the duumvirate of Korean stock market, along with the information technology industry, is depressed, there are no large-cap stocks for investors to buy, except Samsung Electronics. It has been found that Samsung Electronics accounted for 24 percent of the total amount of foreign net purchases this month and the figure far surpassed 17 percent of the rate of Samsung Electronics’ market capitalization.”
Some expressed concerns over the excessive tipping effect for Samsung Electronics. Lee Jong-woo, research chief at IBK Investment & Securities, said, “Samsung Electronics is actually leading the recent Korean stock market by itself. The domestic stock market can be hard hit when the upward trend of Samsung Electronics fizzles out at the moment when there is no bellwether excluding Samsung Electronics.”
Meanwhile, Hyundai Securities said that the current KOSPI index stands at only 1950 to 1970 levels when excluding the market capitalization of Samsung Electronics.