BBIG7 Stalls, Semiconductor Sector Dances Up

Leading Stocks Including Samsung Electronics Stretch
Foreign Investors Drive Upward Trend

[Asia Economy Reporter Eunmo Koo] Since the outbreak of the novel coronavirus disease (COVID-19), the domestic stock market has been led by the 'BBIG (Bio, Battery, Internet, Game)' stocks. However, as these stocks have recently undergone a correction, the center of gravity in the domestic stock market appears to be shifting to semiconductor leaders such as Samsung Electronics and SK Hynix.

According to the Korea Exchange on the 15th, the so-called 'BBIG7 (Samsung Biologics, LG Chem, NAVER, Celltrion, Kakao, Samsung SDI, NCSoft)' stocks have all declined except for NCSoft, showing signs of consolidation since the beginning of this month. Amid the recent correction in U.S. tech stocks, uncertainties stemming from Tesla's Battery Day and regulations on internet companies have acted as negative factors. During this period, Kakao's stock price fell the most by -8.2%, followed by NAVER (-6.0%), LG Chem (-3.8%), and Samsung SDI (-3.6%). Only NCSoft (0.6%) narrowly avoided a decline.

While BBIG stocks have faltered, semiconductor leaders have stretched and risen again. The previous day, Samsung Electronics closed at 60,400 KRW, up 2.37% (1,400 KRW) from the previous trading day. This is the first time in about seven months since February 20th that Samsung Electronics has surpassed 60,000 KRW on a closing basis, marking the first time since the COVID-19 crisis began in earnest. Samsung Electronics and SK Hynix, the top two domestic semiconductor companies by market capitalization, have led the market's upward trend this month, rising 11.9% and 6.5%, respectively.

The rise of semiconductor leaders was driven by foreign investors. Since the beginning of this month until the previous day, foreigners purchased stocks worth 724.8 billion KRW and 150.6 billion KRW of Samsung Electronics and SK Hynix, respectively. This amount corresponds to the first and second highest net foreign purchases during the period, contrasting with the BBIG7 stocks, which were all sold off during the same period.

The recent rally in Samsung Electronics' stock price is attributed to expectations of profit improvement in the second half of the year. Profit improvement is expected to be centered on the mobile phone and home appliance divisions. Dongwon Kim, a researcher at KB Securities, forecasted, "The IM (Internet & Mobile) and CE (Consumer Electronics) divisions are expected to achieve the highest operating profit in four years since Q2 2016, driven by increased shipments due to the reflective benefits of Huawei sanctions and growth in online purchases due to non-face-to-face expansion." Additionally, the memory semiconductor market, which significantly contributes to profits, has passed its bottom, and non-memory performance has entered a mid- to long-term growth phase starting from the third quarter, which are also positive factors.

According to financial information provider FnGuide, Samsung Electronics' operating profit for the third quarter of this year is estimated at 9.535 trillion KRW, a 22.6% increase compared to the same period last year. During the same period, SK Hynix is also expected to increase by 97.7% to 5.3622 trillion KRW.

The supply and demand conditions are also evaluated as positive. This is because the accommodative liquidity environment and high interest from individual investors in the stock market are expected to support the stock price floor. Amid this, expectations for profit improvement are anticipated to be linked with the inflow of foreign capital. Soeun Ahn, a researcher at IBK Investment & Securities, explained, "Since a large portion of foreign capital that exited after the COVID-19 crisis was in Samsung Electronics, this can be viewed positively across the domestic stock market."

However, BBIG stocks are not expected to easily relinquish their role as leading stocks. Researcher Ahn added, "Considering the untact culture that has spread since the COVID-19 crisis and policy directions such as the Korean New Deal, the leading stocks are unlikely to change in the short term," adding, "It is necessary to maintain interest in BBIG stocks."

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