“Did fear of Samsung Electronics and SK Hynix trigger the plunge?” ... Brokerage says it’s actually a good time to buy

[Financial News] KB Securities said the recent sharp drop in Samsung Electronics and SK Hynix shares was an excessive correction driven by a lack of buying support in the domestic stock market and weakened investor sentiment, rather than deteriorating earnings, and viewed it as a good time to increase exposure to the stocks.

In a report on the 16th, Kim Dong-won, head of research at KB Securities, said, “The recent sharp drop in Samsung Electronics and SK Hynix shares appears to be an excessive correction caused by a lack of buying support in the Korean stock market and weakened investor sentiment, rather than damage to fundamentals.”
So far this month, South Korea’s stock market has fallen 18.8%, a steeper drop than Japan’s (-3.5%) and Taiwan’s (-2.0%). Over the same period, Samsung Electronics fell 21.8% and SK Hynix 28.9%. On the previous day, the 15th, Samsung Electronics closed at 210,000 won, down 9.48% from the previous trading day, while SK Hynix ended at 1,262,000 won, plunging 11.06%.
As share prices fell sharply, the KOSPI’s price-to-earnings ratio (PER), based on finalized earnings through the second quarter, dropped to about 8 times. According to KB Securities, this brings it close to an undervalued range comparable to levels seen during the 2008 Global Financial Crisis or the COVID-19 pandemic in 2020.

However, Kim said the semiconductor industry outlook and corporate earnings forecasts were actually improving, adding, “Despite the steep correction in share prices, earnings forecasts for Samsung Electronics and SK Hynix are actually being revised upward.”
Taiwan Semiconductor Manufacturing Company Limited (TSMC), which reported its third-quarter earnings the previous day, said there were no signs of slowing demand for artificial intelligence (AI) semiconductors. Earlier, Dutch semiconductor equipment maker ASML Holding N.V. (ASML) also said in its latest earnings report that its customers’ medium- and long-term demand outlook continued to improve. Market research firm TrendForce likewise forecast that DRAM prices would post a double-digit increase in the fourth quarter of this year.
Based on these factors, KB Securities interpreted the recent plunge in semiconductor stocks as excessive reflection in share prices of risk aversion in financial markets, rather than damage to companies’ ability to generate earnings. It also said the shareholder return policies Samsung Electronics and SK Hynix are expected to announce with their earnings reports at the end of this month could affect a future rebound in their share prices.
Kim said, “Current valuations have already priced in much of the possibility of future earnings declines, but actual earnings forecasts are instead rising, supported by a prolonged memory supply shortage and rising prices,” adding, “This is a phase in which the upside from valuation normalization is greater than the risk of further declines.”
[email protected] Kim Hee-sun Reporter