When in Doubt, Samsung Electronics... Retail Investors Net Buy 1.5 Trillion Won in Sideways Market

Samsung Electronics Preferred Shares Also Purchased for About 900 Billion Won
Special Dividend Expectations Driven by Semiconductor Boom Forecast Next Year

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Individual investors are massively buying Samsung Electronics shares as the KOSPI's upward momentum slows down somewhat. This is interpreted as investment sentiment focusing on the company due to expectations of semiconductor industry improvement next year and year-end special dividends.

According to the Korea Exchange on the 16th, individual investors net purchased Samsung Electronics shares worth 1.5488 trillion KRW over seven trading days from the 7th to the 15th. It was the top net purchase stock by individuals during this period. Samsung Electronics Preferred Shares ranked second with 890.5 billion KRW. The net purchase amounts far exceeded those of SK Hynix (421.5 billion KRW) and Hyundai Motor (364.6 billion KRW), ranked third and fourth respectively during the same period. During this time, the KOSPI began to fluctuate as its previous steep rise slowed. In contrast, investment sentiment concentrated on Samsung Electronics and its preferred shares, which hit all-time highs of 74,500 KRW and 72,500 KRW respectively on the 14th. Even Samsung Electronics Preferred Shares joined the '70,000 KRW club.'

The surge in investment sentiment is analyzed to be due to strong earnings from industry improvement combined with expectations of year-end special dividends. First, the DRAM market is expected to enter a full recovery phase starting from the first quarter of next year. This is because mobile demand from 'VOX' companies such as Vivo, Oppo, and Xiaomi is stronger than expected, resulting in low inventory levels among suppliers, and concerns over supply disruptions have increased due to a power outage at Micron Technology's Taiwan plant. Seongsun Park, a researcher at Cape Investment & Securities, said, "In the short term, purchasing sentiment will be stimulated more than the actual scale of supply disruption," adding, "We believe pricing power has shifted to suppliers, and a price rebound for DRAM is expected from the first quarter of next year."

Foundry performance growth is also anticipated. Due to the overall supply shortage in the industry caused by the spread of 5G smartphones, structural growth is expected to continue as demand for Samsung Electronics' advanced process technology increases. From next year, an expansion in the proportion of external customers is expected, leading to improvements in both sales and profitability.

Expectations for year-end special dividends have also stimulated investment sentiment. This year marks the final year of Samsung Electronics' three-year shareholder return policy. Previously, in October 2017, Samsung Electronics announced it would return 50% of the free cash flow (FCF) generated from 2018 to 2020 to shareholders. Accordingly, it is expected to conduct special dividends using additional dividend funds ranging from at least 6 trillion KRW to up to 8 trillion KRW this year.

Furthermore, expectations for increased dividends have grown as additional funds are anticipated to be needed for inheritance tax payments by Samsung Electronics Vice Chairman Jaeyong Lee, the largest shareholder. As of the 15th, the value of Samsung Electronics shares held by the late Chairman Kun-hee Lee is 18.3964 trillion KRW. Adding shares of Samsung C&T, Samsung Life Insurance, and Samsung SDS brings the total valuation to 22.176 trillion KRW. The inheritance tax amount is calculated by applying the average market price over two months before and after Chairman Lee's death. After adding a 20% premium to the stock valuation, applying the highest inheritance tax rate of 50%, and a voluntary reporting deduction rate of 3%, the inheritance tax is expected to approach about 60% of the stock valuation. Therefore, the market expects that special dividends will help raise cash for inheritance tax payments.

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