Samsung Electronics faces 'sell-the-fact' reaction despite meeting earnings estimates; semiconductor heavyweights under supply pressure.
Middle East tensions drive oil prices and bond yields higher; KOSDAQ finds support in semiconductor materials and battery sectors.
Market Overview
① Samsung Electronics: Earnings in line with estimates, but 'sell-the-fact' kicks in
Samsung Electronics reported preliminary quarterly results with sales revenue of KRW 195 trillion and an operating profit of KRW 107 trillion.
While sales fell slightly short of market expectations, the operating profit slightly outperformed forecasts, helping to soothe lingering concerns regarding the company’s recent earnings slump.
However, the share price came under pressure as investors took profits immediately following the announcement.
Supply dynamics were further influenced by semiconductor ETF rebalancing, which led to a reduction in Samsung Electronics' weighting in favor of other components.
② Middle East tensions trigger rally in oil and yields; foreign selling persists
The KOSPI index deepened its decline during the session following reports that the U.S. was contemplating a military response to Iranian strikes.
While no final U.S. decision was made, heightened vigilance regarding Middle East instability drove international oil prices higher.
The rebound in oil, paired with a climb in U.S. 10-year Treasury yields, constrained buying appetite in the domestic stock market.
Notably, however, the most recent U.S. Treasury auction saw the highest bid-to-cover ratio in a decade, indicating robust demand from investors who find current yield levels attractive.
③ SK Hynix volatility: ADR lock-up expiration adds to supply woes
SK Hynix shares saw increased volatility after a morning rally.
Beyond concerns regarding potential value dilution from the planned listing of a subsidiary, the market is bracing for the expiration of the lock-up period for its U.S. American Depositary Receipts (ADRs).
The overlap with the 90-day post-listing restriction release has been cited as a key factor behind the recent weakness in ADR pricing.
Conversely, the outlook for the broader industry remains positive, with forecasts suggesting memory demand will continue to outstrip supply through 2028.
Supply, Demand, and Sectors
Foreign investors were net sellers across most KOSPI sectors, though they showed buying interest in construction and food and beverage stocks.
On the KOSDAQ, foreign buying was concentrated in the machinery and equipment sectors.
Institutional investors were also net sellers on the KOSPI, excluding select areas such as chemicals and metals.
On the KOSDAQ, institutions net-purchased metal and electrical/electronic stocks while liquidating positions in pharmaceuticals.
Semiconductor materials and components, which underwent a correction the previous day, rebounded, while secondary battery stocks gained strength following LG Energy Solution’s strong earnings report.
Conversely, the pharmaceutical and biotech sectors remained weak amid negative news related to Alteogen and Peptron.
Editor’s Outlook
The South Korean market is currently diverging from the record-breaking trajectory seen in U.S. equities. In the U.S., buying is concentrated in mega-cap tech stocks with strong cash-generating capabilities, which are driving the major indices higher despite the high-interest-rate environment.
Domestically, foreign selling continues against a backdrop of pressure from oil prices and interest rates, compounded by technical factors like the end of share buybacks and ETF rebalancing for Samsung Electronics and SK Hynix. This explains why share prices have struggled to react positively to Samsung's earnings release.
However, the Samsung earnings report itself should be viewed through a constructive lens. While debates over the peak of the memory cycle persist, it is premature to conclude that the industry’s direction has shifted, especially considering the expansion of long-term contracts and the ongoing supply deficit.
Recent two-day corrections have lowered valuation burdens for certain sectors. As market volatility continues, investors should monitor whether the recovery is broadening, specifically within lead sectors such as semiconductor materials, secondary batteries, and policy-linked investment stocks.
Data source: Market Man’s Stock Story (t.me/shmstory)
YouTube: Market Man TV www.youtube.com/@blueoak1004
This report is a reconstruction of a Telegram post by "Market Man’s Stock Story," published with the author's consent. All content may contain errors and does not constitute a recommendation to buy or sell; it should not be used as a basis for trading. Under no circumstances can the contents of this post be used as legal evidence.
