Expectations of 3Q Earnings Surprise... Foreign Investors Buying Leading Stock Samsung Electronics

Net Buying of 700 Billion Won This Month... Reversal from 800 Billion Won Net Selling Last Month
3Q Earnings Surprise Expected... Operating Profit Forecasted at 11 Trillion Won
"US Huawei Sanctions Will Also Act as a Positive Factor"

[Asia Economy Reporter Minwoo Lee] Foreign investors are buying up Samsung Electronics, the 'blue-chip' stock of the domestic market. This is interpreted as a swift response to the expected third-quarter earnings surprise.

According to the Korea Exchange on the 11th, foreign investors net purchased Samsung Electronics shares worth 327 billion KRW the previous day. This amount is six times that of SK Innovation (55.3 billion KRW), the second-largest net purchase by foreigners on the day. They appear to be rapidly increasing their holdings this month. With a total net purchase of 694.9 billion KRW, Samsung Electronics surpassed Shinpoong Pharmaceutical (114.6 billion KRW) to take an overwhelming first place in net purchases for September. This is the second-largest monthly net purchase amount by foreigners this year. It contrasts sharply with last month's net sale of 796.4 billion KRW.

Samsung Electronics seems to have responded quickly as a 'earnings surprise'-level strong performance is expected in the third quarter. KB Securities forecasts that Samsung Electronics will achieve sales of 62.3 trillion KRW and operating profit of 11.1 trillion KRW in Q3 this year. This raises the operating profit estimate by more than 1 trillion KRW from the previous estimate of 10 trillion KRW. Sales are expected to increase by 0.4% year-on-year, while operating profit is projected to rise by 42.3%. It is expected to achieve the best performance in two years since Q3 2018.

This is attributed to increased shipments in the smartphone and home appliance divisions benefiting from the U.S. sanctions on Huawei, as well as growth in online purchases driven by the expansion of non-face-to-face (untact) transactions. KB Securities researcher Dongwon Kim explained, "Although Samsung Electronics may experience a short-term decrease in orders due to U.S. sanctions on Chinese semiconductor companies including Huawei, it will act as an opportunity to expand market share and acquire new customers, resulting in long-term benefits outweighing the drawbacks."

Due to the inability to export semiconductor equipment and parts to the U.S., Chinese semiconductor companies can no longer expand their market share, and the non-memory foundry business is expected to form a duopoly with Taiwan's TSMC in the future, supported by increased orders from Qualcomm, Nvidia, and IBM. The strengthened Huawei sanctions have made it possible to compete on equal footing with Apple and Ericsson in the smartphone and 5G communication equipment markets. Researcher Kim predicted, "Especially, the U.S. Department of Commerce's Huawei sanctions, effective from the 15th, are expected to have a paradoxically positive effect by accelerating the depletion of DRAM inventory and the bottoming out of prices."

Target stock prices of 80,000 KRW are also emerging. KB Securities raised its target price from 75,000 KRW to 80,000 KRW. SK Securities also proposed 80,000 KRW, a 17.65% increase from 68,000 KRW. Meanwhile, Samsung Electronics' stock price was recorded at 59,000 KRW as of 10:06 a.m. on the day.

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