Is Samsung Electronics' Decline a Signal of Economic Slowdown?

Negative Outlook on Semiconductor Industry Combined with US Tapering Concerns
Possibility of '60,000 Electronics' Cannot Be Ruled Out
"From a Macroeconomic Perspective, Samsung's Decline Implies Economic Slowdown"

[Asia Economy Reporters Song Hwajeong, Gong Byeongseon] Samsung Electronics continues its relentless decline amid concerns over the semiconductor industry, combined with fears of U.S. tapering (asset purchase reduction) and economic slowdown. Some opinions suggest that the possibility of Samsung Electronics falling to the "60,000 won level" cannot be ruled out.

As of 9:25 a.m. on the 18th, Samsung Electronics was trading at 73,100 won, down 1,100 won (1.48%) from the previous day. This marks six consecutive trading days of decline, the first time this has happened this year. Based on the previous day's closing price, it has fallen more than 18% from the peak in January.

The decline in Samsung Electronics was triggered when foreign investment banks (IBs) issued negative forecasts about the semiconductor industry, leading to massive sell-offs by foreign investors. Roh Donggil, Chief Researcher at Shinhan Financial Investment, analyzed, "The large-scale net selling by foreigners in the domestic stock market was influenced by the sharp increase in new domestic COVID-19 cases, accelerated tapering discussions following strong U.S. July employment data, and global IBs lowering their semiconductor sector weightings. Since semiconductors like Samsung Electronics have a high weighting in domestic benchmark indices, they suffered a double blow from both market-wide and sector-specific sell-offs."

Hwang Sewoon, Research Fellow at the Korea Capital Market Institute, explained, "The biggest reason for the decline is the growing expectation that the semiconductor industry is entering a downward curve. Buyers who used to purchase semiconductors are preemptively expecting prices to fall, strengthening moves to reduce inventory. Even if semiconductor buyers reduce demand by just 1-2%, the damage will be concentrated on Samsung Electronics and SK Hynix, causing their earnings to drop rapidly."

The visibility of U.S. tapering also acted as a negative factor. The Wall Street Journal (WSJ) reported that with inflation soaring and strong employment data in June and July, the U.S. Federal Reserve (Fed) may announce tapering plans at the Federal Open Market Committee (FOMC) meeting in September and could start tapering as early as November. According to the "Major Issues in International Financial Markets" report released by the Bank of Korea the previous day, many IBs expect the Fed's tapering to be brought forward. Standard Chartered (SC) forecasts that depending on future economic indicators, the tapering announcement could be moved up to before November, while Goldman Sachs, JP Morgan, and Nomura expect a December announcement but keep the possibility of November open. Research Fellow Hwang stated, "It is clear that the semiconductor industry has entered a downward cycle, and liquidity concerns related to tapering are strong, which seems to be why foreign investors are selling Samsung Electronics. The tapering concerns are linked to liquidity securing, and the combination of semiconductor industry conditions and liquidity needs has caused the sell-off pressure on Samsung Electronics."

There is also analysis that Samsung Electronics' decline reflects not only the semiconductor sector but also a global economic slowdown. Professor Kim Youngik of Sogang University Graduate School of Economics said, "From a macroeconomic perspective, Samsung Electronics' decline can be interpreted as implying an economic slowdown. Since exports account for 42% of Korea's real GDP, the Korean economy can be seen as an indicator of the global economy. Korea's leading economic index is expected to peak around August." He added, "Korea's leading economic index leads the OECD by 4-6 months, so the OECD's leading index is expected to peak in the fourth quarter of this year and decline from next year. Samsung Electronics' stock price has preemptively reflected this."

The possibility of further declines in Samsung Electronics should also be considered. Professor Kim predicted, "Other stocks and indices are also expected to worsen, and next year will be a particularly difficult period. When the leading index enters a downward trend, other economic indicators worsen with a lag. Therefore, there is room for Samsung Electronics to fall further than now."

Although the current decline may not deepen significantly, there are forecasts that Samsung Electronics could additionally fall to the 60,000 won range. Economist Lee Jongwoo said, "Just as the stock price rose cyclically since last year, it will show cyclical declines going forward. When Samsung Electronics' decline pauses, the downtrend may shift to shipbuilding, automobile, and steel stocks, and after an overall decline, Samsung Electronics' decline may reappear." He added, "Especially if the U.S. stock market, which has risen to record highs, begins to fall, the possibility of Samsung Electronics reaching the 60,000 won level should be kept open."

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