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Will Samsung stocks repeat December glory?

Samsung has logged monthly gains in seven Decembers over the past decade

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

Samsung Electronics store in Seoul
Samsung Electronics store in Seoul

Over the past decade, Samsung Electronics Co. ’s stocks have usually enjoyed a year-end rally every December on increasing dividends and hopes for a strong semiconductor market the following year. Samsung, South Korea’s largest company by market capitalization, powered Kospi’s rise to the 3,000 level from the 2,600 level in December 2020.

Samsung, which accounts for 20.5% of Kospi’s total market capitalization, needs to rally again to help the country’s main stock index return to the 3,000 level this month.

Samsung has risen 6.03% so far this month despite a 0.26% dip on Dec. 3 as investors raised bets on a rebound in DRAM prices.

STOCKS OF DECEMBER

The stocks reported gains every December in seven years during the past decade, excluding 2013, 2015 and 2018. The shares led the market’s overall rally during the month in 2020 and 2019, rising 19.48% and 10.93%, respectively. Last year, hopes for special dividends fueled the stocks’ strength.

Samsung is a barometer of foreigners’ sentiment on the Kospi. When foreigners buy Samsung, the Kospi rises. When they sell the shares, the index falls. Foreigners have sold a net 27.14 trillion won ($22.94 billion) in the Kospi so far this year, dumping a net 19.78 trillion won in Samsung.

As a result, foreign holdings in Samsung skidded to 51%, a notch higher than a historical support line of 50%, from 55% as of the end-2020. Foreigners may buy the stocks since their holdings were 55-56% in the last three years. They need to buy more than a net 20 trillion won to raise their holdings by 5%.

Individual investors are unlikely to sell Samsung, offsetting foreign demand, as they suffered losses after buying the shares at an average of 87,000 won this year, far higher than the close of 75,600 won on Dec. 3. The number of stocks held by shareholders with less than a 1% stake has increased by more than 100 million so far this year.

STRONG FUNDAMENTALS

Demand for Samsung’s key products is expected to increase next year, analysts said.

Global major technology companies such as Amazon.com, Microsoft Corp. and Meta Platforms Inc., formerly known as Facebook Inc., are predicted to purchase DRAM by 30% more than they initially planned, to make preemptive investments in servers for metaverse platforms, according to KB Securities.

The global smartphone market, which was relatively sluggish this year, is expected to recover led by foldable phones next year. Samsung’s investment in the US is also likely to raise revenue from non-memory chips.
Texas Governor Greg Abbott (left) and Samsung Vice Chairman Kim Ki-nam announce the  billion plant deal
Texas Governor Greg Abbott (left) and Samsung Vice Chairman Kim Ki-nam announce the $17 billion plant deal

“A revenue of more than 300 trillion won from 2023 will level up the shares for the first time since 2012 when the revenue topped 200 trillion won,” said Yuanta Securities Korea analyst Lee Jae-yoon. “In 2023, its non-memory sector’s revenue is expected to reach 34 trillion won and maintain double-digit growth.”

Some analysts, however, played down the recent strength in Samsung’s shares, saying foreigners unwound bearish bets ahead of the end of the year after massive short selling.

“They mainly bought stocks that suffered from short selling, indicating they may have just covered their short positions,” said Kim Kyung-hoon, an analyst at KTB Investment & Securities Co.

Write to Yun-Sang Ko at kys@hankyung.com

Jongwoo Cheon edited this article.
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