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Supply chain crisis, strengthening dollar burdening Samsung

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Company stock fell below the 70,000-won level for the first time in 10 months

By Anna J. Park

The stock price of Samsung Electronics ― Korea's largest company by market cap ― fell more than three percent Tuesday, finishing at 69,000 won ($57.55), as macro-driven uncertainties are sapping the demand for finished goods such as consumer devices, which could possibly hurt the company's growth momentum.

This is the first time since early last December that the share price has fallen below 70,000 won. The price started trading at 70,700 won in the early hours of the session, but continued to drop, once touching as low as 68,700 won at 3 p.m., before rising to its final closing price.

Both foreign and institutional investors jointly net-sold 12 million shares during the session, continuing a spree that started in late September. Foreign nationals have net-sold shares for the past 10 trading sessions, except for last Friday.

With the strong sell-off, the stock price of Samsung Electronics has been on a gradual decline over the past couple of months, dropping nearly 20 percent since early August.

Market experts say the recent bearish direction of the blue chip company's share price is mainly attributed to multiple global macro factors that have been accumulating in the market, burdening forecasts for the company's performance in 2022.

The price is being dragged down by negative effects from global supply chain disruptions, soaring prices of raw materials and energy resources, the strengthened dollar against the Korean won, and an outlook for decreased demand, due to a slowdown in the world's major economies ― the U.S. and China.

As these factors have exerted huge downward pressure on Samsung Electronics' growth outlook for 2022, its stock price lost upward impetus, officials and stock analysts said.

"Increased global macro uncertainties from the Evergrande liquidity crisis, China's latest power shortages, lower-than-expected U.S. employment data, as well as worrisome inflation ― which was considered temporary due to increased raw material prices, but is likely to last longer ― have led the market to maintain an increased level of uncertainty in the global economic outlook and in corporate profits for 2022," said Lee Seung-woo, an analyst at Eugene Investment & Securities. "Based on these global macro uncertainties, Samsung Electronics' corporate profit is also expected to show signs of a slowdown in the first half of next year," the analyst added.

Unless the situation further worsens in the coming months, the electronic giant's corporate profit could reenter a growth cycle in the second half, he said.

A continuous decline in memory chip prices is also aggravating the already-worsened investment sentiment toward the company, as Samsung is the largest memory chip supplier in the world. The falling price is a reflection of the expected demand decrease in the U.S. and China as their economies are expected to lose growth momentum next year.

"The downward trend of the memory chip price is expected to accelerate for the time being, and it is expected to cause a decline in the firm's performance until the first half of next year," said Kim Sun-woo, an analyst at Meritz Securities.

Some market watchers are calling for top management to begin "customized acquisitions" to boost the firm's global competitiveness, saying an aggressive M&A strategy could help it regain growth.

Securities companies are lowering their target prices for the stock, despite its solid third-quarter performance, reflecting concerns about the fourth quarter amid these global uncertainties.

Goldman Sachs recently lowered its target price by 7 percent, from 107,000 won to 100,000 won, citing the decrease in semiconductor prices negatively influencing the share price, despite the solid performance in the third quarter.

Several local securities firms have also lowered their target prices; Shinhan Financial Investment lowered its to 96,000 won from 100,000 won, while KB Securities lowered its to 100,000 won from 105,000 won.
Park Ji-won annajpark@koreatimes.co.kr


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