Tech retreat in U.S. drags Korea's biggest names to recent lows

The session on Friday in Seoul was choppy and indecisive, with big names hitting 52-week lows early in the day only to recover later in the day.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,155.49 points on Friday, down 15.44 points, or 0.71 percent, from the previous trading day. [NEWS1]

A tech rout that started in the United States hit Korea hard and dragged local IT companies down.

The session on Friday in Seoul was choppy and indecisive, with big names hitting 52-week lows early in the day only to recover later in the day as institutional investors bought on a slight strengthening in the won and expectations of a recovery next year.

Samsung Electronics fell to 51,800 won ($36) at 9:55 a.m., a new 52-week low and down 1.5 percent from the previous day's closing price, before bouncing back to close at 53,100 won, up 0.95 percent for the day.

It has touched new 52-week lows for six consecutive trading days.

The bearish investment sentiment came as the Korean tech company is projected to report a substantial fall in sales and profits during the third quarter, affected by the weak demand for chips and electronic devices and lower chip prices. In July, the market consensus for the company's third-quarter operating profit was 14.3 trillion won. That number was 11.9 trillion as of Friday.

SK hynix closed at 83,100 won, up 2.85 percent Friday. The chipmaker rebounded after hitting a new year-low, of 80,400 won at 9:50 a.m., that day.

The sharp drop early Friday was driven by declines of big U.S. tech stocks overnight.

The Nasdaq plunged 2.8 percent to 10,737.51 on Thursday. Apple lost 4.9 percent to $142.24 after Bank of America lowered its price target for the company's stock. The iPhone maker's stock is down 21.72 percent from the beginning of the year.

On Wednesday, Apple fell 1.3 percent to $149.84 following a press report that the company will lower its production target for the new iPhone 14s due to weaker-than-expected demand.

TSMC, the Taiwan chipmaker that supplies Apple with chips for iPhone 14s, traded at $69.28 on Thursday, down 3.95 percent. In Korea, LG Innotek, which supplies camera modules to Apple, dropped 0.55 percent to 273,500 won Friday.

On Thursday, Micron, a U.S. memory chip manufacturer, fell 1.94 percent to $50.01 after the company reported a 19.8 percent decline in quarterly sales for the June-August period.

As the IT demand slowdown is forecast to continue through the year, Korean chipmakers are likely to struggle through the fourth quarter, according to analysts.

"As the corporate clients got down to lowering inventory levels from the end of the second quarter, the memory industry outlook seems to grow worse at a record pace," wrote Song Myung-sup, an analyst at Hi Investment & Securities, in a Friday report.

"DRAM and NAND shipment increase rate forecasts for the third quarter and the entire year are expected to miss the previous guidance significantly."

Some argue that demand will rebound next year, citing Micron's positive forecast for the demand recovery in the first quarter.

"Concerns over the chip demand slowdown have increased due to Micron's weaker-than-expected performance," said Park Kwang-nam, an analyst at Mirae Asset Securities, Friday.

"But as Micron came up with a quick plan to cut investments and purchasing costs while commenting on a positive outlook for the second half of fiscal 2023, foreigners and institutions picked up blue chip stocks such as Samsung Electronics and SK hynix, pushing up the prices."

On Friday, the Kospi dropped 0.71 percent, or 15.44 points, to 2,155.49 points, a new low for the year.

BY SHIN HA-NEE, PARK EUN-JEE [shin.hanee@joongang.co.kr]