Foreign holding of Samsung Electronics hits all-time annual high in April

[Photo by MK DB]

Foreign ownership in Samsung Electronics Co., the world’s biggest memory chipmaker, reached an all-time high in just one year as offshore investors up buying amid growing expectations that the chip industry will recover in the second half of the year.

According to KB Securities Co. and multiple sources from the investment banking industry on Thursday, foreign investors owned 51.09 percent of Samsung Electronics shares as of Wednesday, the highest since 51.13 percent on April 22 last year.

The figure is up 1.42 percentage points from 49.67 percent earlier this year. Over the last decade, the highest foreign ownership in the company’s shares was 58.01 percent on July 30 in 2019 while the lowest was 48.97 percent on Jan. 25 in 2016.

According to Korea Exchange, foreign investors net purchased 5.04 trillion won ($3.81 billion) in Samsung Electronics shares between Jan. 2 and April 5, which is in contrast to how they offloaded nearly 3 trillion won in the shares during the same period last year.

Foreigners are buying Samsung Electronics shares despite the outlook that the ongoing slump in the chip industry will likely continue throughout the first half of the year. The recent net buying trend is driven by the growing expectations that the price of memory chips will bounce back in the second half after reaching the lowest in the second quarter.

“The balance of supply and demand will likely be restored in the second half when the production cuts will take effect, with the inventory of chip makers going back to normal levels,” said Kim Dong-won, head of the research center at KB Securities. “We expect the prices of DRAMs and NAND flash memory chips to fall further in the second quarter before reaching the bottom.”

Market analysts said that Samsung Electronics’ low valuation was one of the reasons behind the solid net buying of foreign investors. The chipmaker’s 12-month forward price-to-book ratio was 1.24x, which is lower compared with its rival stocks.

Samsung Electronics is expected to have its earnings remain weak in the first half, which will begin to surge in the second half.

According to Korean brokerage houses that monitored the chipmaker’s performance over the last month, Samsung Electronics’ operating profit will likely fall from 759.7 billion won in the first quarter to 598.6 billion won in the second quarter before surging to 3.98 trillion won in the third quarter.

Samsung Electronics’ share price tends to reflect its potential earnings six months ahead, meaning additional fluctuations to the current price are less likely to happen.