Foreign Investors Returning to Samsung Electronics... 1 Trillion KRW Net Purchase Since Last Month

Already 670 Billion Won Net Purchases This Month... Largest Scale This Year
Strong Performance Expected in Q3 Following 2Q Earnings Surprise

[Asia Economy Reporter Minwoo Lee] Foreign investors, who had long ignored the 'blue-chip' Samsung Electronics, are now buying it again, drawing attention. Since last month, the net purchase amount of Samsung Electronics by foreigners has exceeded 1 trillion won. Analysts attribute this to the positive impact of better-than-expected second-quarter earnings and expectations that semiconductor demand will continue to rise despite concerns over a resurgence of COVID-19 in the second half of the year.

According to the Korea Exchange on the 16th, foreign investors have net purchased Samsung Electronics for a total of 670.4 billion won so far this month until the previous day. This is 166% of the net purchase amount of 403.8 billion won last month. In other words, since early last month, foreigners have bought more than 1 trillion won worth of Samsung Electronics. This is a stark contrast to the previous trend of large-scale sell-offs. Foreign investors had been net sellers of Samsung Electronics on a large scale this year. They increased net sales to 243.4 billion won in January and 3.6408 trillion won in February, and at the peak of COVID-19 fears when the KOSPI plunged to the 1400 level for the first time in 11 years in March, they sold a whopping 4.9515 trillion won. Although there was a rebound with a net purchase of 3.2 billion won in April, they again net sold 496.6 billion won in May.

This trend also showed a temperature difference compared to foreign investors' trading trends in the overall domestic stock market. Foreigners have continued net selling every month this year. After reaching a peak with net sales of 12.8529 trillion won in March, they consistently disposed of stocks with 4.8618 trillion won in April and 4.0612 trillion won in May. Although net sales slowed somewhat with 800.1 billion won last month, they have already sold 1.2978 trillion won as of the 15th of this month.

The main reason foreigners are paying renewed attention to Samsung Electronics is the company's strong second-quarter earnings. Samsung Electronics posted preliminary consolidated results for the second quarter of this year with sales of 52 trillion won and operating profit of 8.1 trillion won. Compared to the same period last year, sales decreased by 7.36%, but operating profit increased by 22.7%. Compared to the first quarter, sales fell by 6%, but operating profit rose by 25.6%. The operating profit margin was 15.6%, the highest since the fourth quarter of 2018 (24.2%). This significantly exceeded the securities analysts' consensus compiled by financial information firm FnGuide, which forecast sales of 51.1401 trillion won and operating profit of 6.4703 trillion won. Despite the global economic slowdown caused by COVID-19, this performance is regarded as an 'earnings surprise.'

Despite a decline in smartphone sales, semiconductor sales to server and PC companies increased due to the rise in non-face-to-face (untact) demand such as remote work, online classes, video conferencing, and gaming caused by COVID-19. Based on this, the fixed transaction price of the flagship product, DRAM, rose for five consecutive months until May, contributing to improved earnings.

It is also analyzed that one-off gains of around 1 trillion won influenced the strong performance. As flexible organic light-emitting diode (OLED) panel demand decreased due to sluggish iPhone sales, Apple, a client, reportedly paid a kind of compensation.

There are forecasts that strong performance will continue in the second half of the year. Although the possibility of a COVID-19 resurgence remains and one-off gains will disappear, semiconductor demand is still solidly supported, and the recovery in home appliances and smartphone sales could offset concerns. According to FnGuide, the consensus for third-quarter earnings is sales of 61.0077 trillion won and operating profit of 9.2147 trillion won. Sales are expected to decrease by 1.61% year-on-year, but operating profit is expected to increase by 18.5%.

Stock prices are also on the rise. As of 9:40 a.m. on the day, the price was 54,700 won. This is a 6.8% increase compared to the closing price of 51,200 won on the 1st of last month. Despite fluctuations, the trend is upward, supported by foreign investors' selling pressure. Researcher Sunhak Lee of Hanwha Investment & Securities said, "The semiconductor sector is expected to see earnings growth with the recovery of mobile demand, and the smartphone (IM) sector could improve profits due to sales growth and the impact of new foldable smartphone models. The display sector is also expected to benefit from seasonal peak effects, so even after removing one-off gains, it should achieve solid earnings."

This content was produced with the assistance of AI translation services.