Foreigners Pause in Semiconductor Stocks Amid Strong Industry Conditions

Record Foreign Net Selling on 'Four Witches Day'
Stock Prices Pause Briefly but Upward Momentum Remains Strong
2021 Boom Expected... Solid Q4 Earnings Anticipated

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] On the previous day, known as the 'Four Witching Hours' when the expiration dates of index and individual stock futures and options overlapped, foreign investors sold Samsung Electronics and SK Hynix in unprecedented volumes. However, the stock price adjustment was not significant. Analysts believe that the potential for stock price growth remains strong given the favorable industry outlook for next year.

According to the Korea Exchange on the 11th, foreign investors net sold Samsung Electronics, the leading stock in the domestic market, worth 600.5 billion KRW on the previous day. This is the second-largest amount this year. After net selling 850.8 billion KRW, the largest this year, on the 30th of last month, they again sold in large volumes within about a week. Foreign investors also disposed of a large amount of SK Hynix, the second-largest by market capitalization, net selling 311.8 billion KRW in a single day. This is the largest scale since the 317.4 billion KRW net sale on September 7, 2018. On this day, called the 'Four Witching Hours' due to the overlapping expiration of four types of derivatives?stock index futures and options, and individual stock futures and options?derivative liquidation orders flooded the market, increasing volatility and triggering profit-taking sales.

As a result, the stock prices briefly entered a consolidation phase but soon regained upward momentum. As of 9:25 AM on the day, Samsung Electronics’ stock price rose 0.82% from the previous day to 73,500 KRW. This marked a return to a firm trend compared to the previous day’s 1.35% decline. At the same time, SK Hynix recorded 117,000 KRW, up 0.43% from the previous day, showing a better trend compared to the 3.32% decline on the previous day.

The positive outlook for semiconductor companies’ business conditions and expected solid fourth-quarter earnings are believed to have attracted investment sentiment, indicating that the potential for further price increases remains. According to financial information provider FnGuide, the market consensus for Samsung Electronics’ fourth-quarter earnings this year is sales of 62.9034 trillion KRW and operating profit of 10.0857 trillion KRW, representing increases of 5.04% and 40.86%, respectively, compared to the same period last year. Agyujin, a researcher at DB Financial Investment, stated, "Samsung Electronics’ DRAM and NAND inventories are tighter than the historical average, and factors such as the overall reduction in memory industry investment due to the COVID-19 pandemic, the power outage incident at Micron Technology in the U.S., and SK Hynix’s acquisition of Intel’s NAND division are limiting supply increases," adding, "Next year, memory price rebounds are expected as server-centered memory demand recovery gains momentum."

[Image source=Yonhap News]

SK Hynix is also expected to post strong fourth-quarter results this year. According to FnGuide, the consensus for the fourth quarter is sales of 7.4809 trillion KRW and operating profit of 878.5 billion KRW. Sales are estimated to increase by 7.99% year-on-year, while operating profit is expected to surge by 272.23%. Kiwoom Securities recently raised its target price to 160,000 KRW. Park Yuak, a researcher at Kiwoom Securities, explained, "Despite the decline in the KRW-USD exchange rate, the strong growth in DRAM and NAND shipment volumes will more than offset this. Expectations for PC sales at the end of the year and early next year exceed initial forecasts, and memory semiconductor inventory accumulation demand from Chinese companies Oppo, Vivo, and Xiaomi is occurring earlier than expected. Additionally, some cloud customers like Amazon are making server investments in preparation for the year-end shopping season, indicating a broad-based improvement in demand."

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