KOSPI Crisis

 

The Samsung Electronics share price hit a record low in 26 months with its operating sales for the third quarter of this year estimated at below 5 trillion won (US$4.8 billion). Securities experts predicted that the entire Korea Composite Stock Price Index (KOSPI) could be faltering in that Samsung Electronics alone accounts for 17 percent of the aggregate market value.

On Sept. 23, the price closed at 1.161 million won (US$1,116) per share, losing 2.27 percent from the previous session. It is lower than the 52-week low of 1.18 million won (US$1,133) that had been recorded on Sept. 3, and is close to its 26-month low of 1.158 million won (US$1,114) recorded on July 25, 2012. The market capitalization plummeted from 174.9916 trillion won (US$168.3997 billion) to 171.0145 trillion won (US$164.5724 billion) in the most recent session, too.

The ETFs investing in the Samsung Group showed bearish movement as well. The KODEX Samsung Group lost 1.52 percent, to continue its downward movement for three sessions in a row. The TIGER Samsung Group dropped by 1.15 percent to remain bearish for three consecutive sessions, too.

The adverse situation can be attributed to the recent forecast that Samsung Electronics’ business profit rate in the mobile phone industry would drop from 12.2 percent to 10 percent or so between 2013 and 2015. In addition, a negative outlook on its operating profits for Q3, 2014 added fuel to the fire. On the preceding day, Samsung Securities adjusted its forecast downward from 5.7 trillion won (US$5.48 billion) to 4.7 trillion won (US$4.5 billion). Hyundai Securities also estimated the amount at 4.195 trillion won (US$4.037 billion).

One of the biggest concerns is the negative impact that Samsung Electronics could have on the entire stock market. Despite the 3.9771 trillion won (US$3.8241 billion) drop in market capitalization, the company is equivalent to 16.56 percent of the local stock market. Until now, the KOSPI dropped almost every time Samsung Electronics lost its value. Sept. 23 was no exception, either.

Still, at least some experts are saying that the negative outlook has already been reflected to the stock price, which is likely to move back up in view of the cash flow and price-to-book ratio (PBR). The PBR is currently 1.1 times based on the estimated 12-month performance, meaning that there is enough room for a rise. Foreign investors have recorded a net buying for 11 consecutive sessions since Sept. 3, and institutional investors increased their investment in the ETFs as well. 

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