Investors are bullish on Samsung shares

Samsung Electronics' share price is rising rapidly, despite gloomy forecasts for the chip industry.

Samsung Electronics devices are displayed in a shop in Seocho District, southern Seoul, on Jan. 6. [YONHAP]

Samsung Electronics' share price is rising rapidly, despite gloomy forecasts for the chip industry.

Samsung Electronics shares rose 6.3 percent in the first week of 2023, propelled by foreign investors who net purchased 501 billion won ($395 million) worth. Institutional investors unloaded 226.71 billion won, and retail investors 282.46 billion won in the same period.

The share price continued to rise Friday after the company reported an earnings shock for its fourth quarter: 4.3 trillion won in operating profit, according to an earnings guidance, the worst quarterly profit since the third quarter of 2014.

The government’s support measures for the chip industry and China’s pausing of major chip investments are seen as the reasons foreign investors are bullish.

The Finance Ministry announced on Jan. 3rd an increase in tax credits for semiconductor investments from the current 8 percent to 15 percent for big companies. For small and medium-sized enterprises, the maximum tax credit could be raised to 25 percent from 16 percent.

Those increases need to be approved by the National Assembly, but the announcement itself was enough to encourage investors.

Samsung Electronics' stock price soared 4.33 percent the following day and another 0.70 percent the day after.

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China’s pause on chip investment also redirected money from China into the local market.

Surging Covid cases are hobbling the Chinese economy and forcing its government to pause mammoth spending on its domestic chip industry, reported Bloomberg News Friday.

“It’s impractical for China to try to recreate within its borders the entire global chip supply chain that took the world’s most powerful countries four decades to build," Brady Wang, an analyst at industry consultancy Counterpoint, told Bloomberg.

China was reported to be working on a more than $140 billion support package for its semiconductor industry, according to Reuters in December. But top officials are discussing ways to move away from costly subsidies that haven’t yielded great results, reported the Business Standard Thursday.

Despite recent gains, Samsung Electronics’ share price is still down around 20 percent from the same period a year earlier. The company shares were trading below 60,000 won for three weeks after Dec. 15.

“The semiconductor industry, which is facing the worst situation in its history, is forecast to continue to stay weak until the supply excess normalizes in the second quarter or the end of the third quarter this year,” said Song Myung-sup, an analyst at Hi Investment & Securities. “The chip industry is projected to recover in the fourth quarter as clients start to restock.”

BY JIN MIN-JI [jin.minji@joongang.co.kr]