Samsung Electronics bounces back on foreign buying spree

By Lee Kyung-min

Samsung Electronics shares climbed back to an intra-day high of 80,000 won ($67.30), Thursday, on the back of a foreign buying spree and eased concerns over a slowdown in the semiconductor industry. Investor sentiment got a further boost after global chipmaker Micron announced upbeat profit guidance figures. The Korean electronics giant's stock price exceeded the psychologically significant 80,000 won mark for the first time since Aug. 10 when it stood at 82,200 won. The shares closed at 79,900 won, up 0.63 percent from the previous session.

The recent increase in the tech giant's share price has been driven by foreign investors who net purchased 2.57 trillion won since the beginning of this month.

Market watchers say the price will continue its uptrend for the time being, led by a rebound in DRAM prices along with expectations for a solid fourth-quarter performance.

Samsung shares rose more than 11 percent this month, up from 71,300 won. The double-digit increase is more than double that of the benchmark KOSPI which rose 5.1 percent in the same period.

The much-awaited price rebound is due in large part to a reassessment of the market consensus that the logic chip industry's likelihood of experiencing a prolonged slowdown is overblown, as indicated by weakening arguments that the industry would face a steep slump in the fourth quarter.

This contradicts earlier views over the past few months that prices of DRAM and NAND flash would plummet due to the COVID-19 pandemic, and that Samsung and its competitors had to brace for price falls.

The pessimistic assessment led to the price diving to around 60,000 won in October after peaking to a high of 96,800 won earlier this year.

Also advancing the rosy outlook is the firm's October-December earnings scheduled to be announced two weeks from now.

Its sales are expected to total 75 trillion won in the fourth quarter, with an operating profit of 15.2 trillion won.

Market analysts are expressing cautious optimism about the firm's quarterly earnings bottoming out in the first quarter of next year, before a swift return to high profitability.

“I'm not saying that the memory downturn is over,” Eugene Investment and Securities Lee Seung-woo said. “However, it is highly probable that the decline of this memory cycle will not be that sharp, and the slowdown cycle won't last long.”

“Due to the rosier-than-expected forecast, Micron's stock price rose 6 percent in over-the-counter trade, followed by a 10.5 percent increase the next day. There is no way of saying it better than that Micron's earnings outlook has defeated market anxiety brought on by the Omicron variant.”

Making predictions about the future course of share prices is difficult, as complicated by uncertainties over lingering systemic risks, he added. However, the possibility of the logic chip industry outperforming market expectations will increase.

“Logic chip cycles are likely to proceed smoothly, but valuations and stock prices of memory chip makers had already reflected hard landings. We have to wait and see how things unfold in the coming months.”

KB Securities analyst Kim Dong-won said demand for Samsung-made DRAMs will soar up 23 percent year-on-year next year.

“Dram prices are expected to bottom out in the first quarter of next year. Samsung Electronics will become widely attractive to global investors seeking to expand the portfolio of the semiconductor industry.”