Samsung, SK hynix sell-off excessive as memory outlook stays strong: analysts
KOSPI and Kosdaq closing indices are displayed in the dealing room of Hana Bank in Seoul, Friday. The benchmark KOSPI closed at 5,668.05, up 2.05 percent from the previous session. Yonhap
KOSPI snaps 7-session losing streak as chip stocks rebound
The recent steep sell-off in Samsung Electronics and SK hynix shares has been excessive, driven by a lack of buying support in the Korean market and weaker investor confidence rather than deteriorating earnings, market watchers said Friday.
Shares of the two semiconductor giants have fallen sharply this month amid a broader rout in the benchmark KOSPI, despite rising earnings forecasts fueled by strong artificial intelligence (AI) demand and tightening memory supply.
Samsung Electronics and SK hynix shares plunged 23.9 percent and 31.5 percent, respectively, over seven consecutive trading sessions starting Oct. 6, while KOSPI shed 1,449.52 points, or 21 percent.
On Friday, the market recovered some ground, with Samsung rising 2.62 percent and SK hynix gaining 0.79 percent as KOSPI rebounded 2.05 percent, snapping a seven-session losing streak.
Analysts say the widening gap between share prices and fundamentals has pushed valuations for the two chipmakers to relatively low levels.
"The recent sharp declines in Samsung Electronics and SK hynix are an excessive correction driven more by a lack of buying support in the Korean stock market and weakened investor sentiment than by a deterioration in fundamentals," Kim Dong-won, head of research at KB Securities, said in a report.
Kim said investors had priced in excessive concerns about a recession and falling corporate earnings, despite no clear signs of a deterioration in the semiconductor industry’s fundamentals.
SK Securities echoed the assessment, saying that the memory market remains on strong footing.
"Despite the won's appreciation, earnings forecasts for next year are being revised upward on expectations that the memory supply shortage will deepen more than previously anticipated and that prices of high-bandwidth memory will rise next year," analyst Han Dong-hee said.
The brokerage also maintained its view that long-term supply agreements would improve the sustainability of earnings and strengthen chipmakers' cash generating capacity, paving the way for higher shareholder returns.
"Now is the right time to buy memory stocks," Han said.
The analyst pointed to improving earnings estimates and potential shareholder returns as possible catalysts for a recovery. SK hynix is scheduled to announce its third-quarter earnings on Oct. 28, followed by Samsung Electronics on Oct. 29.
Corporate logos of Samsung Electronics, left, and SK hynix / Yonhap
Meanwhile, the benchmark KOSPI, which plunged 7.57 percent the previous day amid concerns over AI-related spending and U.S. inflation, opened 1.8 percent higher at 5,653.99 and closed at 5,668.05, up 113.83 points, or 2.05 percent, from the previous session.
Retail investors and institutional investors were net sellers of 484.6 billion won ($ 363.3 million) and 683.3 billion won worth of shares, respectively, while foreign investors net purchased 341 billion won worth of shares.
Investor sentiment was buoyed by remarks from Federal Reserve Chair Kevin Warsh at the International Monetary Fund’s annual meetings in Bangkok, Friday.
"The advent of this new technology is probably the most consequential change in the U.S. and the global economy in my lifetime," he said, describing AI as "a positive shock."
The tech-heavy Kosdaq also rebounded sharply after a steep fall in the previous session, closing at 794.78, up 33.96 points, or 4.46 percent. The index extended its gains largely on institutional buying, triggering a buy-sidecar activation at around 12:55 p.m.
The won strengthened against the dollar, with the exchange rate falling 13.2 won from the previous session to 1,331.4 won per dollar.