Fluctuating Share Prices
South Korea’s stock market behemoth Samsung Electronics saw its share prices plunge following the announcement of a stock split. Its share priced over 2 million won (US$1,848) dropped and its daily stock price fluctuation range and transactions doubled compared to the past.
According to the Korea Exchange (KRX) on Feb. 11, Samsung Electronics’ average range of fluctuation in stock prices per day surged to 3.86 percent until the 9th after announcing its plan for a 50-to-1 stock split on Jan. 31. The company’s daily fluctuation range reached 9.12 percent as its stock prices increased 8.71 percent and then decreased 0.4 percent on the same day of the announcement. Its daily average range of fluctuation in stock prices from Jan. 1 to 30, a day before the announcement, stood at 2.17 percent. Its daily stock price fluctuation range surged as much as 77.9 percent since then.
The domestic stock market volatility grew but Samsung Electronics’ shares showed particularly severe ups and downs. Considering the fluctuation range of SK Hynix and Hyundai Motor, which rank among the top in terms of market cap on the KOSPI, was less than 20 percent over the same period, Samsung’s intense fluctuations were not caused by the recent fluctuation in the index.
After Samsung Electronics announced its plan for the stock split, the ratio of foreign investors in its stock holdings fell over 1 percent point from 52.26 percent to 52.19 percent, while individual investors showed a strong buying trend and made up the gap. Foreigners are selling Samsung Electronics’ shares due to concerns over its poor performance but individuals are purchasing more than 2.4 trillion won (US$2.21 billion) worth of its shares.
The total volume of transactions also grew. The number of Samsung Electronics’ transactions a day on the average remained from 210,000 to 270,000 last year. However, the figure far exceeded 500,000 after the announcement for the stock split. When the price of stocks fell one fiftieth through the stock split, the volume of transactions and the range of volatility can grow further. This is why some market analysts say that Samsung Electronics’ stocks can fall so low as to become “Samsung Coin” just like digital currencies that have an unpredictably huge amount of transactions and price volatility.
The volatility in the KOSPI index will also expand because of Samsung Electronics which has the most influence on the KOSPI index. Samsung Electronics is more influential to the index than nine other companies that rank among the top 10 in terms of market cap on the KOSPI. Samsung Electronics’ ups and downs will strongly shakes the KOSPI index. In addition, Celltrion, which showed a big fluctuation range from the KOSDAQ, transferred to the main KOSPI. Therefore, the volatility in the KOSPI can expand further for a while and investors should make a deliberate decision on the investment.