Earnings Prospects of Chip Business Improving
The stock price of KOSPI market bellwether Samsung Electronics Co. is about to break this year’s high. Until recently, the company’s stock had remained bearish due to poor sales and large-scale sell-off by foreigners. However, a rising demand for the stock among foreign investors and growing expectations for improvement in earnings of the company’s semiconductor business is boosting its share price.
Samsung Electronics closed at 47,000 won (US$39.43) in the benchmark KOSPI market on Sept. 10, up 0.21 percent from the previous trading day. The figure rose for five trading days in a row and 7.3 percent from the beginning of this month alone. The price of Samsung Electronics shares once increased to 47,200 won (US$39.60) during the trading hours, approaching a record high for the year. The recent upturn of Samsung Electronics is largely due to the fact that expectations for improved performance are growing. In fact, the fall in DRAM prices stopped last month and showed little change.
An increasing number of securities companies are also raising expectations for Samsung Electronics. DB Financial Investment Co. has increased the company’s operating profit forecast in the third quarter by 7.8 percent to 7.11 trillion won (US$5.96 billion), while Samsung Securities Co. raised the figure from 6.70 trillion won (US$5.62 billion) to 7.10 trillion won (US$5.96 billion). The figures surpass the market consensus of 6.97 trillion won (US$5.85 billion). They are also raising the target price on Samsung Electronics shares. Eugene Investment Co. has increased the figure by 5 percent to 56,000 won (US$46.98), while DB Financial Investment raised it to 58,000 won (US$48.66). In particular, the ratio of the company’s short sale has been recently on the decrease. The ratio of short sale of Samsung Electronics shares exceeded 20 percent on Aug. 23 but it decreased to 0.78 percent on Sept. 5 when the stock price increased more than 3 percent. The figure has been remained at around 4 percent since then.
The sharp rise in Samsung Electronics’ share prices is also propelled by strong foreign buying. As uncertainties in global politics such as the trade dispute between the United States and China, Brexit and a series of demonstrations in Hong Kong have been assuaged, foreign investors have been increasing the net purchase of South Korean stocks and net bought market bellwether Samsung Electronics shares on their passive investment patterns. Foreigners have net bought Samsung Electronics stocks for four trading days in a row since Sept. 5.