Market experts expect that operating profits of KOSPI-listed companies in the second quarter will increase 4.3 trillion won (US$3.72 billion) from the previous quarter. Out of 4.3 trillion won (US$3.72 billion), 3.3 trillion won (US$2.86 billion), or 76 percent, will come from Samsung Electronics. SK Hynix is also expected to see its operating profits grow nearly 500 billion won (US$433.09 million) from the previous quarter.
It means that overall performance has become dependent on semiconductor stocks, including Samsung Electronics, even further. The experts say that non-IT businesses’ achievements cannot be properly reflected in their stock prices when their performance fails to prop up Samsung Electronics.
According to financial information provider WISEfn on July 5, more than three securities firms said that the estimated operating profits of 176 firms listed on the KOSPI will stand at 43.17 trillion won (US$37.39 billion). The figure is up 4.28 trillion won (US$3.71 billion) from 38.89 trillion won (US$33.69 billion) of the KOSPI-listed firms’ overall operating profits announced by the Korea Exchange in May.
Considering the forecast that Samsung Electronics’ operating profits in the second quarter will increase 3.26 trillion won (US$2.82 billion) from 9.9 trillion won (US$8.57 billion) at the first quarter, most of the increase in overall operating profits will come from Samsung Electronics. Moreover, Samsung Electronics is also expected to account for 30.5 percent of the total operating profits of KOSPI-listed firms, up from 25.5 percent at the previous quarter.
It also means that the operating profits of other industries, except for the semiconductor sector, will remain still or decrease in consideration of SK Hynix’s performance growth.
In fact, WISEfn predicted that the earnings of the industries which are sensitive to economic ups and downs such as chemicals, steel and energy will drop in the second quarter compared to the consensus in the previous quarter. This is because the inflation rate forecast has decreased due to low oil prices. Moreover, financial stocks, which led the performance growth in the first quarter along with IT stocks like insurance, bank and securities, are expected to see its performance decline overall this quarter.
There have also been concerns that the performance growth cannot be properly reflected in stock prices when there is an excessive dependence on some industries. In other words, one or two industries have a limit to lead the overall KOSPI stock prices even if they achieve good performance.
Lee Jong-woo, head of research at IBK Investment & Securities, said, “When there is a high level of dependence on a particular industry, the stock price index cannot go up by as much as performance growth. In 2012, Samsung Electronics and Hyundai Motor took up half of KOSPI-listed firms’ total net profits but the stock price index failed to rapidly grow at that time. It is clear that Samsung Electronics pulled off a huge result but the stock market does not necessarily react positively if only some industries are doing good.”
IT stocks are expected to keep leading the market this year, with industry sources forecasting the semiconductor industry will hit a peak in the fourth quarter.
Ultimately, the performance growth of other industries will determine the direction of stock market in the future.
The good news is the non-IT sectors have favorable factors such as growing home market due to the improvement of consumer confidence and increasing exports.