Samsung shares' underperformance deepens on growth concerns, won

Shares of Samsung Electronics Co., South Korea’s largest stock on the main bourse, are significantly underperforming as analysts slash price targets on growth concerns amid a protracted semiconductor industry slowdown.

Samsung’s shares are also weighed down by the weaker won, which triggered a broad foreign sell-off of local stocks, and the group family’s plan to unload Samsung shares to pay a huge inheritance tax.

In late Wednesday trade in Seoul, the stock was flat at 69,000 won, the lowest since Dec. 1, compared with the benchmark Kospi index’s 1% rise.

Samsung has fallen 16% year to date, far underperforming the Kospi’s 1.5% gain.

Analysts say Samsung’s shares have been subdued largely due to the gloomy industry view that the memory sector will slow in the coming quarters.

Concerns over the industry outlook have grown as China’s electricity crisis is seen worsening supply chain disruptions in addition to the resurgence of the coronavirus in Southeast Asia, aggravating the supply chain bottleneck.

“Demand uncertainty has heightened following the electricity crisis in China, which is affecting production at PCB and other electronic gadget makers,” said KB Securities analyst Kim Dong-won.

“Market concerns are growing that memory chip prices will soon be decided not by suppliers but by their clients.”

A FLURRY OF TARGET PRICE CUTS

More than half a dozen brokerages cut their target prices for Samsung over the past week, citing expectations for weaker fourth-quarter earnings compared with year-earlier results.

Mirae Asset Securities Co. last week reduced its target price for Samsung to 82,000 won from 100,000 won earlier. Ebest Investment & Securities Co. has lowered its target price to 87,000 won from 95,000 won.

The weak stock performance came just a few days after the company posted its highest quarterly operating profit in three years, with its revenue exceeding 70 trillion won ($58 billion) for the first time.

Samsung said on Oct. 8 that its preliminary operating profit jumped 27.9% on-year to 15.8 trillion won in the third quarter, while its sales rose 9% to 73 trillion won.

SOFTER WON, INHERITANCE TAX PAY

Samsung’s weak share performance was also affected by the softer local currency.

On Tuesday, the Korean won weakened below the 1,200 per dollar mark for the first time in 15 months as growing worries about global inflation and expectations of a tighter US monetary policy spurred equity outflow.

Foreign investors sold a net 820 billion won ($685 million) worth of stocks in the country’s main bourse on Tuesday alone.

“Foreigners are broadly selling emerging market shares amid the strengthening of the dollar. Retail investors, the main buying force in Korea, are also hoarding cash rather than buying into stocks,” said Shinhan Asset Management analyst Jung Sung-han.

Samsung is also under pressure by share overhang concerns as group family members are set to sell $1.8 billion worth of their holdings of Samsung affiliates to pay the inheritance tax after the death of the late group Chairman Lee Kun-hee.

Among the family members, Hong Ra-hee, the deceased chairman’s wife, plans to sell 19.9 million shares of Samsung Electronics worth 1.4 trillion won ($1.2 billion).

Write to Sung-Mi Shim at smshim@hankyung.com
In-Soo Nam edited this article.