Samsung at 400,000 won, SK hynix at 2 million won? Retail investors are all in on a semiconductor slump

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[The Financial News] Shares of the two semiconductor giants, Samsung Electronics and SK hynix, have been surging, but retail investors are betting on a decline in semiconductor stocks. Individual investors in both the Korean and U.S. markets are showing the same trading pattern.
According to the Korea Exchange (KRX) on the 20th, retail investors have been the biggest net sellers of Samsung Electronics and SK hynix so far this month, from April 1 to 17. They sold 691.82 billion won worth of Samsung Electronics and 298.35 billion won worth of SK hynix on a net basis. Over the same period, retail investors net sold 14.681 trillion won in the domestic stock market, with those two stocks alone accounting for about 10 trillion won in sales.
The same trend is visible among Korean investors buying overseas stocks. During the same period, the most heavily net bought overseas stock was the Direxion Daily Semiconductor Bear 3X ETF (SOXS), with purchases totaling $254.87 million, or 374.1 billion won. The ETF moves in the opposite direction of the ICE Semiconductor Index at three times the index’s daily return.
Retail investors’ trading pattern has now flipped from last month. The stocks most heavily bought by domestic retail investors from March 3 to 31 were Samsung Electronics, at 16.8171 trillion won, and SK hynix, at 7.0704 trillion won. Over the same period, the most heavily net bought product among overseas retail investors was the Direxion Daily Semiconductor Bull 3X ETF (SOXL), which tracks three times the daily performance of the ICE Semiconductor Index. In other words, they were betting on semiconductor gains during the height of the U.S.-Iran conflict, then shifting to a bet on semiconductor declines as war fears eased.
A financial industry official said of the trend, "It seems individual investors believe the strong earnings of semiconductor companies have already been priced in," adding, "They are moving into other undervalued sectors for higher returns." In fact, so far this month, domestic retail investors have net bought LS ELECTRIC (447.1 billion won), HD Hyundai Heavy Industries (358.4 billion won), and Naver (248.3 billion won), while overseas retail investors have been net buyers of Tesla ($167.49 million, 247.3 billion won) and Microsoft ($154.44 million, 228 billion won).
However, experts said the strength in semiconductor stocks is likely to continue.
Kim Dong-won, a researcher at KB Securities, forecast that Samsung Electronics will post operating profit of 33.5 trillion won this year, up 668 percent from a year earlier, while SK hynix will post 25.1 trillion won, up 432 percent. The combined expected operating profit of 58.6 trillion won for the two companies is about five times TSMC’s projected operating profit of 12.9 trillion won. Even so, the combined market capitalization of Samsung Electronics and SK hynix stands at 2,214 trillion won, still below TSMC’s 2,869 trillion won. KB Securities said Samsung Electronics should be valued at 2,000 trillion won and SK hynix at more than 1,300 trillion won.
Hyungkeun Ryu, a researcher at Daishin Securities Co., Ltd., said, "The combined market capitalization of Samsung Electronics and SK hynix has reached 2,000 trillion won," adding, "The stronger-than-expected pace of short-term earnings growth and the value of a cycle that will likely be prolonged amid a shift toward long-term contracts are expected to drive a re-rating of the stocks."
fair@fnnews.com Han Young-joon Reporter