Samsung Electronics Takes Off Late... Will Group Stocks Soar Too?

Samsung Electronics Rallies Over 10% in Four Days... Foreigners Account for 70% of Total Purchases
Group Stocks Outlook Bright for Second Half... Funds Flow into Samsung Group Fund

[Asia Economy Reporters Koh Hyung-kwang and Geum Bo-ryeong] Samsung Electronics, which had been sidelined in the rising market, has recently kicked off a rally by rising more than 10% over the past four days. Expectations of a windfall from the US-China conflict over Chinese telecom equipment maker Huawei's 5G equipment and improved earnings prospects due to strong mobile demand have fueled concentrated buying by foreign investors. Foreign buying has also poured into Samsung SDI, Samsung Electro-Mechanics, and Samsung SDS, creating an atmosphere of participation in the rally.

According to the Korea Exchange on the 29th, Samsung Electronics was trading at 60,100 KRW on the KOSPI market as of 10 a.m., up 2.5% from the previous trading day. This is the first time in over five months since February 20 that Samsung Electronics has regained the 60,000 KRW level. It has risen for four consecutive trading days, including a 5.4% increase the previous day, surging more than 10% during this period. The all-time high price (62,800 KRW) is also within reach.

Foreign investors' love calls have been the foundation of the upward trend. Foreigners bought up 920.8 billion KRW worth of shares just the day before. Considering that foreign investors net purchased about 1.131 trillion KRW in the KOSPI market the previous day, more than 70% of the total net buying amount was concentrated on Samsung Electronics. Foreigners also net purchased about 389.2 billion KRW worth of Samsung Electronics shares on the 27th, bringing the total net purchases this month to 2.3606 trillion KRW. This amount overwhelmingly surpasses the second-ranked stock for foreign net purchases this month, POSCO (222.8 billion KRW). In effect, foreigners have been focusing almost exclusively on Samsung Electronics.

This buying momentum was influenced by foreign media reports that Samsung Electronics could benefit from the US-China 'Huawei conflict.' The US Wall Street Journal (WSJ) reported on the 27th (local time) that "the US-China conflict over China's Huawei 5G equipment is providing Samsung Electronics, the world's fourth-largest player in this field, with an opportunity to expand its global market presence."

News that TSMC, the world's number one foundry, recorded its highest-ever sales in June also acted as a positive factor. With Huawei's position weakening in the smartphone market, expectations for Samsung Electronics' smartphone shipment expansion and semiconductor earnings growth were reflected.

There is speculation that Samsung Electronics, which had been sidelined in the rising market despite a near earnings surprise in the second quarter, may be starting a late rally. Lee Kyung-soo, head of the Meritz Securities Research Center, said, "Foreigners are net buying stocks amid a weak dollar environment. Especially, they are focusing on semiconductor stocks that had been sluggish for a while, so if earnings support continues, there is ample room for further gains."

Samsung Group stocks are also attracting attention alongside Samsung Electronics. The previous day, Samsung SDI, Samsung Electro-Mechanics, and S-1 closed at 393,000 KRW, 144,500 KRW, and 85,800 KRW, up 3.9%, 4.7%, and 1.3%, respectively, compared to the previous session.

The bright outlook for Samsung Group stocks in the second half of the year is analyzed as the main investment factor. For Samsung SDI, a qualitative leap in mid-to-large batteries is expected in the third quarter. Since last month, major European countries have raised subsidies for electric vehicles, and the price of plug-in hybrids (PHEVs) has increased, strengthening the Europe-led momentum. Energy Storage Systems (ESS) are expected to benefit from renewable energy promotion policies, part of major countries' economic stimulus measures.

Samsung Electro-Mechanics is expected to end its earnings slump caused by COVID-19 in the second quarter. With increased investment in 5G mobile communication services in the second half, the component business division's performance is expected to improve significantly. Kim Un-ho, a researcher at IBK Investment & Securities, explained, "Operating profit in the second half is expected to increase by more than 50% compared to the first half. The substrate division will improve significantly as flexible printed circuit board (RF-PCB) volumes ramp up with overseas clients, the chip division will normalize operating rates with the lifting of lockdowns, and the module division expects new product launches from domestic clients and increased volumes from overseas clients."

Funds are also flowing into Samsung Group stock funds. According to financial information provider FnGuide, the Samsung Group stock fund's assets under management increased by 2.6 billion KRW the previous day.

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