Korean chip stocks gain on expected easing of U.S. monetary policy

2023.03.14 13:22:01 | 2023.03.14 13:27:24

[Image sources: Samsung Electronics and SK hynix]이미지 확대

[Image sources: Samsung Electronics and SK hynix]

Shares of leading South Korean semiconductor companies, such as Samsung Electronics Co. and SK hynix Inc., closed higher for the first time in five trading days on Monday, driven by speculation that the U.S. Federal Reserve may slow its pace of monetary tightening amid a liquidity crisis triggered by the collapse of Silicon Valley Bank.

Securities firms forecast that the semiconductor industry will improve in the second half of this year, with shares possibly hitting the bottom in the second quarter.

According to the Korea Exchange, Samsung Electronics shares closed at 60,000 won ($46), up 500 won or 0.84 percent from the previous session. SK hynix ended the day at 84,300 won, up 1,000 won or 1.2 percent. The Korean won against the U.S. dollar depreciated by 19.5 won or 1.47 percent to trade at 1,303.5 won, and the yield on three-year Korean government bonds also fell by 0.162 percentage points to 3.541 percent.

Last year, Korean semiconductor companies hit a short-term low due to concerns about monetary tightening by the U.S. Federal Reserve and declining semiconductor demand. However, they rebounded by 15 percent to 25 percent until January of this year. The rally did not last long in the following months as concerns about the Fed’s tightening due to stronger-than-expected U.S. economic data. This caused market interest rates and the greenback to rise against the Korean won, leading to an 8 percent to 12 percent drop in semiconductor stock prices.

Foreign investors began to sell Samsung Electronics stocks. During the second week of Feb. 3, they purchased 422.6 billion won worth of the chipmaker’s shares, but their net purchase gradually decreased and they net sold 116.3 billion won worth of shares during the second week of March.

However, securities firms expect that business conditions for the local semiconductor industry will improve from the second quarter and share may rebound.

The decline in memory semiconductor price that began in the fourth quarter of 2021 is expected to narrow after the first half of this year, said Baek Kil-hyun, an analyst at Yuanta Securities Korea Co., citing that the inventory assets of Samsung Electronics, SK hynix, and Micron increased in the fourth quarter of last year, but since has slowed significantly.

In the first quarter, major chip customers are focusing on depleting inventory due to the off-season effect, so demand for memory chip purchases is sluggish, said Kim Dong-won, an analyst at KB Securities Co., adding that inventory could normalize from the second quarter because customers’ memory chip inventory approaches an appropriate level and that could slow the price falls in memory semiconductors from the second quarter.

Some advice that investors should remain conservative on SK hynix because the company is more focused on memory semiconductors than Samsung Electronics, so its stock price fluctuates more due to business conditions than macroeconomic factors.

By Kang In-seon and Minu Kim

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