Foreign investors in the South Korean stock market have dumped their SK Hynix shares in the wake of a negative report released by a foreign securities firm early this month.
According to the Korea Exchange, they sold SK Hynix shares worth approximately 500 billion won (US$450 million) in 10 trading days from August 1 to 14. During the period, SK Hynix posted the highest net selling value in the KOSPI market in terms of this month’s net selling by foreign investors. For reference, the net selling value of the runner-up, LG Electronics, stood at 88.3 billion won (US$79.4 million).
Foreign investors continued to buy SK Hynix shares from January to July this year with the only exception of June, when their net sale in SK Hynix totaled 50 billion won (US$45 million). Specifically, they net-bought SK Hynix shares worth 2.2 trillion won (US$2.0 billion) for the first seven months of this year and the size of the net purchase was second to none in the KOSPI market during the period. However, the net purchase abruptly stopped after Morgan Stanley’s report early this month.
As a result, the stock price of SK Hynix fell 12% this month alone, dipping below 80,000 won) (US$72) per share, in spite of the company’s record-high performance. In the second quarter of this year, the operating profit of SK Hynix hit an all-time high of 5.5739 trillion won (US$5.01 billion) with a year-on-year increase of 82.7%.
According to Morgan Stanley, the undersupply that has resulted in a rise in DRAM price is disappearing and the performance of SK Hynix can be affected by a decline in DRAM price for the time being. It also mentioned that a NAND flash oversupply has already begun, the current DRAM oversupply is coming to an end, and semiconductor prices are likely to fall with time as competition becomes more and more intense for the presence of Chinese manufacturers. On August 6 and 10, immediately after the report saying so, the stock price of SK Hynix dropped 4.7% and 3.7%, respectively. Goldman Sachs recently changed its view for the worse on investment in the semiconductor industry, too.
Still, South Korean experts are focusing more on the company’s growth potential than on the adverse market situations, saying that Morgan Stanley’s predictions are exaggerated. “The ongoing arguments surrounding the current state of the semiconductor sector and rise in stock price volatility in the sector are because of a shift in DRAM market focus from PC and mobile toward server, that is, from B2C toward B2B,” said KB Securities analyst Kim Dong-won, adding, “This means semiconductor companies’ performances may get worse next year but the performance deterioration is likely to be rather limited for those with higher profit potentials.”