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Samsung a safe asset in coronavirus-driven downturn?

Analysts expect tech stock to rebound after the pandemic ends

By Anna J. Park

Samsung Electronics is considered by many to be one of the best blue chip stocks in Korea. The stock of the global tech-giant not only accounts for the largest share of the total amount of market capitalization on the Korea Exchange, it has had one of the most solid increase rates over the past decades.

Even amid the COVID-19 pandemic spread, while the benchmark KOSPI fell by 21.6 percent from the start of this year to March 25, Samsung Electronics stock only saw a 14.9 percent decline during the same period, outperforming the general index.

Behind such performance are millions of individual investors who staunchly buttress the Korean tech giant's stock value. During the 14 trading sessions from March. 5 to 23, individual investors in Korea continued to buy Samsung shares, while foreign investors logged a consecutive net selling of the stock.


When expanding the period up to the past three months from Dec. 24 last year to March 23 this year, individual investors bought Samsung Electronics shares worth 7.42 trillion won ($6.03 billion), while foreign investors sold 6.78 trillion won.

Market observers say that learning from the effects of the previous crashes of the stock market caused such divergent paths by the two groups of investors. In fact, Samsung Electronics shares rebounded to more than twice their value within a year or two of a major market crash.

For example, the chipmaker's shares were traded at around 700,000 won prior to the 2008 global financial crisis, yet the price nosedived to some 407,500 won in October that year. However just within a year, the price rebounded back to the range of 800,000 won, and exceeded the one million won mark in January, 2011.


During the MERS outbreak in 2015, Samsung shares fell to a level of 1.06 million won in August from its previous 1.5 million won. Yet the stock price more than doubled to 2.38 million by August 2017.

In addition to such past learning effects, the potential boundless price and possibility of windfall profits encourage retail investors. Back in May 2018, the global tech company conducted a 50:1 stock split, easing individual investors' access to the blue chip.

"It seems individual investors see that now is the time to buy Samsung Electronics shares ― the representative blue chip of the nation ― from their past learning experiences that the market always rebounded after a huge plunge," an unnamed market insider told The Korea Times.

"Samsung Electronics' stock is highly likely to rebound in the end, based on its abundance in liquidity and overwhelming competitiveness in the semi-conductor sectors, which would allow them to bear the current recession," he said, adding the stock price may go through a longer period of correction than expectations.

Analysts with special expertise in the chip industry also share the view that the stock's outlook is still pretty robust.

"In terms of demands for chips, some sectors like PCs and smartphones may decrease, yet the demands for servers are expected to further increase. The prices for DRAM and NAND are also on an upward trend," Lee Jae-yun, analyst at Yuanta Securities told The Korea Times.

"Of course, if the current situation drags out too long, then the semi-conductor industry would also get hurt, and this uncertainty is probably the reason why foreign investors dumped Samsung Electronics shares during the past two weeks. But the chip market itself is not bad. As the stock's price to book value ratio went down to the same level during the 2008 global financial crisis, I don't see any other factors that would trigger further plunge of the stock," he added.

Song Myung-sup, analyst at Hi Investment & Securities, also expected the stock to rebound, given pent-up demand during a recovery session.

"We don't know how long the current pandemic situation will continue, yet it will recover in the end, and the global IT industry is bound to be restored," he told The Korea Times.

"When the market plunges for reasons outside of fundamental causes, the recovery speed tends to be very fast. That's because of delayed aggregated pent-up-demand," he said, explaining that the semi-conductor industry hasn't yet suffered much from COVID-19, given that the industry's shipments are better than expected, and the exchange rate is favorable as well.


Analysts expect tech stock to rebound after the pandemic ends

By Anna J. Park

Samsung Electronics is considered by many to be one of the best blue chip stocks in Korea. The stock of the global tech-giant not only accounts for the largest share of the total amount of market capitalization on the Korea Exchange, it has had one of the most solid increase rates over the past decades.

Even amid the COVID-19 pandemic spread, while the benchmark KOSPI fell by 21.6 percent from the start of this year to March 25, Samsung Electronics stock only saw a 14.9 percent decline during the same period, outperforming the general index.

Behind such performance are millions of individual investors who staunchly buttress the Korean tech giant's stock value. During the 14 trading sessions from March. 5 to 23, individual investors in Korea continued to buy Samsung shares, while foreign investors logged a consecutive net selling of the stock.


When expanding the period up to the past three months from Dec. 24 last year to March 23 this year, individual investors bought Samsung Electronics shares worth 7.42 trillion won ($6.03 billion), while foreign investors sold 6.78 trillion won.

Market observers say that learning from the effects of the previous crashes of the stock market caused such divergent paths by the two groups of investors. In fact, Samsung Electronics shares rebounded to more than twice their value within a year or two of a major market crash.

For example, the chipmaker's shares were traded at around 700,000 won prior to the 2008 global financial crisis, yet the price nosedived to some 407,500 won in October that year. However just within a year, the price rebounded back to the range of 800,000 won, and exceeded the one million won mark in January, 2011.


During the MERS outbreak in 2015, Samsung shares fell to a level of 1.06 million won in August from its previous 1.5 million won. Yet the stock price more than doubled to 2.38 million by August 2017.

In addition to such past learning effects, the potential boundless price and possibility of windfall profits encourage retail investors. Back in May 2018, the global tech company conducted a 50:1 stock split, easing individual investors' access to the blue chip.

"It seems individual investors see that now is the time to buy Samsung Electronics shares ― the representative blue chip of the nation ― from their past learning experiences that the market always rebounded after a huge plunge," an unnamed market insider told The Korea Times.

"Samsung Electronics' stock is highly likely to rebound in the end, based on its abundance in liquidity and overwhelming competitiveness in the semi-conductor sectors, which would allow them to bear the current recession," he said, adding the stock price may go through a longer period of correction than expectations.

Analysts with special expertise in the chip industry also share the view that the stock's outlook is still pretty robust.

"In terms of demands for chips, some sectors like PCs and smartphones may decrease, yet the demands for servers are expected to further increase. The prices for DRAM and NAND are also on an upward trend," Lee Jae-yun, analyst at Yuanta Securities told The Korea Times.

"Of course, if the current situation drags out too long, then the semi-conductor industry would also get hurt, and this uncertainty is probably the reason why foreign investors dumped Samsung Electronics shares during the past two weeks. But the chip market itself is not bad. As the stock's price to book value ratio went down to the same level during the 2008 global financial crisis, I don't see any other factors that would trigger further plunge of the stock," he added.

Song Myung-sup, analyst at Hi Investment & Securities, also expected the stock to rebound, given pent-up demand during a recovery session.

"We don't know how long the current pandemic situation will continue, yet it will recover in the end, and the global IT industry is bound to be restored," he told The Korea Times.

"When the market plunges for reasons outside of fundamental causes, the recovery speed tends to be very fast. That's because of delayed aggregated pent-up-demand," he said, explaining that the semi-conductor industry hasn't yet suffered much from COVID-19, given that the industry's shipments are better than expected, and the exchange rate is favorable as well.


Park Ji-won annajpark@koreatimes.co.kr


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