Samsung Electronics loses momentum

Foreign investors sold most in Samsung Elec. stocks

By Kim Yoo-chul

Samsung Electronics, Korea’s most valuable company according to all financial analyses, is losing its luster because the company’s key businesses are under pressure, resulting in foreign investors reducing their holdings of Samsung Electronics stocks.

According to Korea Exchange (KRX), foreign investors sold 1.9 trillion won worth of stocks in listed companies from Jan. 1 to Jan. 18. This is more than half of 3.5 trillion won in stocks in listed companies sold by foreigners in 2015.

Samsung Electronics was the main target of foreigners because foreign investors sold 540 billion won in Samsung stocks during the period, followed by Hyundai Motors, Amore-Pacific, SK hynix, POSCO, Samsung Life and Hyundai Mobis.

Samsung Electronics stocks ended 1,171,000 won on the nation’s main bourse, Tuesday. Still, the company stocks fell about 10 percent so far this year.

Reasons given for the massive unloading of Samsung stocks were mixed with some analysts saying the weak Samsung stocks are due to growing fears in emerging markets after volatility in the Chinese economy.

“Foreign investors will be repositioned in the Korean stock markets by changing its investment portfolio focusing on defensive stocks. That’s why shares of major exporters saw a steep decline,” said Samsung Securities analyst Kim Yong-ko.

Key businesses are in uncertainty

A broad consensus to explain the ongoing weak moves of Samsung Electronics stocks is because of growing pressure in its profit structure because its semiconductor and smartphone businesses are still experience market turbulence.

Samsung earlier said that it expects to report 53 trillion won in sales during the fourth quarter of last year, while the firm is seen to generate 6.1 trillion won as operating profits for the last three months ended December 31. This was below earlier market expectation.

“Operating profit at the company’s smartphone division will remain about 2 trillion won, a cut by 16.3 percent from a previous quarter. Also, its chip division is expected to report operating profit below 3 trillion won during the fourth quarter from 3.66 trillion won a quarter earlier,” said the analyst.

What makes situations tough is that the market outlook in the first half of this year isn’t that rosy given predictions that the display and semiconductor industry will be trapped in another oversupply hit by output expansion by Chinese companies.

“Weak chip price will be continued throughout this year. In smartphones, the rise of Chinese budget makers will also challenge the company’s mobile division,” Lee Jae-yoon, an analyst at Yuanta Securities, said.

Lee said a plan by iPhone maker Apple to tighten its parts inventory-level strategy to prepare for a weak demand will also pose another threat for Samsung’s display, chip units.

FN Guide, a local research firm, said a median forecast by 20 researchers about Samsung Electronics first quarter earnings guidance was 5.80 trillion won, a cut from 6.08 trillion won in a previous survey.

Eugene Investment lowered its target price on Samsung to 1.6 million won from 1.7 trillion won, followed by IBK Investment Securities to 1.54 million won from 1.7 million won.

Samsung Electronics executives said it has high hopes for the sale of its upcoming flagship smartphone ― Galaxy S7 ― which will be unveiled in this year’s mobile expo in Spain.

“Recovery in the global chip industry may come later than earlier expected; therefore, the issue is whether the S7 will have positive impact from investors,” said an official at Samsung.

He said it’s unlikely that Samsung’s new businesses such as bio to make huge contribution for the corporate in the near future as Samsung just entered those segments.