"I was anxious all weekend — turns out I should have sold on Friday," one semiconductor investor said.
"Is the Samsung Electronics and SK hynix rally finally over?" another investor asked.
Wall Street fell across the board overnight after Federal Reserve Chair Kevin Warsh signaled a hawkish stance on inflation, with semiconductor stocks bearing the brunt of the selloff. Fear is spreading among investors that Samsung Electronics and SK hynix will fall further when markets open Monday. Both stocks had already closed lower on Friday, with Samsung Electronics down 3.38 percent and SK hynix off 4.45 percent from the previous session.
As concerns over further declines mount, attention is turning to whether share buybacks by Samsung Electronics and SK hynix can provide a floor. The two companies already count more than 10 million individual shareholders combined.
On Friday (local time), the S&P 500 closed down 0.25 percent at 7,711.76 on the New York Stock Exchange, while the tech-heavy NASDAQ Composite fell 0.52 percent to 26,402.42. The Philadelphia Semiconductor Index tumbled 3.47 percent.
The selloff was driven by Warsh's remarks suggesting the Fed is prepared to respond to elevated inflation, raising the likelihood of an interest rate hike.
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In his first Jackson Hole speech since taking office, Warsh said the Fed still has work to do if it is not convinced that inflation is moving toward the central bank's 2 percent target clearly and quickly enough.
Warsh, who had largely refrained from commenting on monetary policy, was widely read as signaling a willingness to raise rates to bring down inflation. Markets responded sharply: the probability of a Fed rate hike in September jumped from 35.4 percent to 57.5 percent on Friday.
Nvidia, which had surged the previous day on a blowout earnings report, fell 4.57 percent, while semiconductor designer Marvell Technology tumbled 10.28 percent.
Investors are now anxiously watching whether the fallout will drag down Samsung Electronics and SK hynix on Monday. Both flagship semiconductor stocks have already broken below closely watched price levels.
Brokerage analysts, however, remain broadly positive on both stocks. Mirae Asset Securities maintained its target price of 370,000 won ($268) for Samsung Electronics, implying upside of about 44 percent from Friday's closing price.
Kim Young-geon, a researcher at Mirae Asset Securities, said the stock is overreacting to macroeconomic uncertainty despite record-level shareholder returns, adding that the current price-to-book ratio of 4.3 times has fallen back to pre-AI cycle levels.
KB Securities also said it expects earnings improvement and shareholder returns to drive a rerating of the companies' valuations.
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Meanwhile, with foreign investors continuing net selling, large-scale buybacks by Samsung Electronics and SK hynix have emerged as a key source of buying support. According to Korea Exchange data released Saturday, a category of buyers identified as "other corporations" — widely believed to represent the companies' own buyback programs — purchased roughly 1 trillion won worth of shares every trading day for seven consecutive sessions from Aug. 20 through Friday.
During that period, other corporations net purchased 2.47 trillion won worth of Samsung Electronics shares, while individual investors (-140.1 billion won), foreign investors (-948.4 billion won) and institutional investors (-1.38 trillion won) all recorded net selling. For SK hynix, other corporations alone bought 7.62 trillion won worth of shares.
Samsung Electronics has announced plans to buy back approximately 15 trillion won in shares through open-market purchases from Monday through Nov. 21. SK hynix also plans to acquire about 40 trillion won worth of its own shares from Aug. 20 through Nov. 19.
park@heraldcorp.com
