Amid Fading Expectations for Semiconductor Super Cycle
Foreign investors' stake in Samsung Electronics has dropped to the lowest point in four and a half years.
Samsung Electronics' stock price rose 0.57 percent from the previous trading day to 76,600 won on Nov. 8. Foreign investors held 3,057.13 million common shares in the company, accounting for 51.21 percent of its entire listed stocks (5,969.78 million shares). This was the lowest percentage since their stake hit 50.59 percent on May 22, 2017.
With the cancellation of stocks on Dec. 12, 2018, Samsung Electronics saw foreigners’ stake soar to 55.76 percent. It peaked at 58.01 percent on July 31, 2019, and remained at the 56 percent range afterwards. But it plunged to 53 percent in May 2020 when the stock market was hit by COVID-19. However, foreign ownership of the company's stocks briefly rebounded to around 56 percent between November and December 2020in anticipation of a semiconductor super cycle. But since then, foreigner investors have continued to offload Samsung shares, lowering their proportion.
In 2021 alone, foreign investors sold a net 21,598.3 billion won (276.92 million common shares) of Samsung Electronics, the largest in terms of net selling volume and value in the domestic stock market in 2021.
Samsung Electronics' stock price may drop below 70,000 won as concerns over the semiconductor industry have been raised. Foreigners sold a net 2.5972 trillion won worth of Samsung Electronics shares for 23 trading days from Oct. 5 to Nov. 5. On the other hand, Korean individual investors bought 2.241 trillion won worth of Samsung Electronics stocks during the same period, showing conflicting moves.
In particular, Samsung Electronics stocks were exposed to short selling mainly led by foreigners, which undermined the image of Samsung Electronics stocks. Short-selling transactions of them amounted to 471 billion won in the past one-month period. Considering that foreign investors account for about 80 percent of short selling transactions in the securities market, Samsung Electronics' short selling volume also seems to have come largely from foreign investors. As a result, Samsung Electronics’ stock price already fell more than 27 percent compared to its high (96,800 won) in early 2021.
A prevailing view among stock market analysts is that foreigners' net selling was largely affected by a drop in expectations for a semiconductor super cycle. Morgan Stanley, a global investment bank, predicted that the growth rate of DRAM prices peaked as demand caught up with supply in the DRAM market as risk from entering the second half of the semiconductor cycle outweighed earnings from it.
Some analysts say that concerns over the memory semiconductor industry are too excessive. "If the manufacturing industry begin to make efforts to rebound with expectations for U.S. infrastructure investment and the possibility of the Chinese government’s further cut in its reserve ratio are in sight soon, big stocks such as those of semiconductor companies will highly likely to recover," said Roh Dong-gil, a research fellow at Shinhan Financial Investment,
The problem is that if foreigners' portion of Samsung Electronics' stocks falls further, the stock price itself is likely to undergo further adjustments. In addition, foreigners are likely to sell additional Samsung Electronics shares due to the prospect of a slowdown in the semiconductor industry.
Experts unanimously say that favorable factors in the foundry business are needed to rebound Samsung Electronics' stock prices. "Improving the yield of Samsung Electronics’ foundry line process will hold the key to raising the company’s stock price because valuation should be ramped up rather than business performances," said Seo Seung-yeon, a researcher at Heungkuk Securities