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Samsung returns as foreigners’ top pick; Kospi just shy of record high

With easing inflation jitters and growing vaccinations, it’s time again to buy blue chips, analysts say

By Jun 03, 2021 (Gmt+09:00)

Korea's benchmark stock index finished Thursday at levels just shy of all-time highs.
Korea's benchmark stock index finished Thursday at levels just shy of all-time highs.

Samsung Electronics Co., the bellwether of South Korea’s main bourse, has returned as the market darling, with foreigners buying heavily on the view that global chip demand hasn’t peaked yet.

Samsung, the largest stock on the Korea Exchange, finished up 2.5%, the biggest percentage gain in more than three months, at 82,800 won on Thursday, outperforming the benchmark Kospi index’s 0.7% rise.

SK Hynix Inc., Korea’s second-largest stock in terms of market capitalization, closed up 2.4% at 129,000 won.

The two semiconductor giants’ decent gains pushed up the benchmark stock market index to finish at 3,247.43 points on June 3, just shy of its all-time high close of 3,249.3 points on May 10.

The day’s performance was largely thanks to foreign investors, the dominant players on the Korean bourse, who returned as net buyers in both spot and futures markets, a signal that indicates the Korean equities market is set to rise further.

They bought a net 237.3 billion won worth of shares on the main Kospi market and 1.06 trillion won in Kospi 200 futures contracts on Thursday. Among individual stocks, they purchased 431.7 billion won worth of Samsung Electronics and 81.1 billion won in SK Hynix.

INFLATION JITTERS

Foreigners have been selling Korean shares since the start of the year except for April on fears over growing inflationary pressure, to which emerging markets are particularly susceptible.

In May alone, they sold as much as 8.52 trillion won in shares on the Kospi market.

On Thursday, the Korean stock market advanced for a fifth straight session, backed by the US Federal Reserve's reiteration overnight that the ongoing price hike will be transient, easing market jitters over inflation.

Samsung returns as foreigners’ top pick; Kospi just shy of record high

Investor sentiment has also been boosted by the increasing vaccination rates among Koreans, analysts said.

“With vaccinations getting speed in Korea, foreigners are returning to the domestic market,” said Samsung Securities analyst Jeong Myung-ji.

Amid the foreign selling spree over the past few months, shares of Samsung Electronics and SK Hynix have been trapped in a boxed range, with some analysts cutting their target prices for the two companies.

Views on the chipmakers have turned negative as some industry watchers raised concerns that demand for PCs and other IT products, which had remained elevated during the pandemic, would fall back with an increasing number of people opting to go out after getting vaccinated.

TIME TO BUY BACK SAMSUNG, SK HYNIX

Some foreign brokerages, however, maintained their positive views on Korean chipmakers.

Credit Suisse, in its June 3 research note, said chip demand for personal computers is being replaced by demand for corporate PCs with people gradually returning to their workplace.

The brokerage maintained a buy rating with its target price of 126,000 won, predicting that the average sale price of DRAM chips will rise further in the third quarter.

Samsung returns as foreigners’ top pick; Kospi just shy of record high

Meritz Securities, a Korean brokerage, on Thursday raised its target price for Samsung to 110,000 won from 96,000 won earlier.

“In memory chips, it’s still the seller’s market, where chipmakers exert influence. Their profits will rise at a steep pace in coming quarters,” said Meritz analyst Kim Sun-woo.

Some analysts said that Korea’s institutional investors, who joined foreigners' selling spree over the past months, could be forced to buy back blue chips such as Samsung and SK Hynix.

“When the market noise about falling stocks is heard everywhere, that’s usually when the market is bottoming out,” said Jung Sung-han, a senior manager of Shinhan Asset Management Co.

Write to Jae-Yeon Ko at yeon@hankyung.com

In-Soo Nam edited this article.

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