Foreigners Re-buying Samsung Electronics… Should Increase Semiconductor Holdings

It has been confirmed that foreign mid- to long-term funds have been flowing into the domestic stock market for the past 2-3 weeks. Although the market is currently going through a painful period of index fluctuations, this is interpreted as a positive sign that overall market conditions could improve if it secures a bottom and holds firm. Lee Ji-hwan said, “Foreign mid- to long-term funds have been flowing in for about two or three weeks now.”

Among global macroeconomic variables, U.S. government bond yields have stopped surging and started to decline, and oil prices also plummeted for two days amid potential economic sanctions. The decline in government bond yields and stabilization of oil prices are analyzed to be positive catalysts for the stock market. Lee Ji-hwan explained, “The decline in government bond yields or oil prices is ultimately a boon for the stock market, isn’t it?” This can create conditions for a market upturn when short-term momentum occurs.

Analysis suggests that the Jackson Hole Meeting is not a venue for directly revealing the Fed's policy direction, but rather largely involves fundamental economic discussions. In the past, Chairman Powell did not mention specific policy-related matters at this meeting, and given the style of current Fed Chairman nominee Kevin Warsh, no major policy announcements are expected at this meeting. Lee Ji-hwan stated, “This Jackson Hole Meeting itself can reveal the Fed’s direction. It’s not a place where the Fed Chairman discusses policy-related matters.”

Nvidia’s recent earnings announcement was so robust that it was difficult to find any weaknesses. Particularly notable was the strong performance in the data center segment, which suggests that hyperscalers' capital expenditures remain solid. Nvidia successfully defended its revenue guidance by increasing product prices by 15%, which was positively received by the market. Lee Ji-hwan commented, “Honestly, this time it was an earnings announcement where it was difficult to find any weaknesses in Nvidia.”

Concerns about Nvidia's increasing accounts receivable were addressed with the explanation that it is a natural phenomenon accompanying revenue growth. Accounts receivable, often referred to as credit sales, inevitably increase when sales grow. While the collection period for accounts receivable, which was a cause of past performance declines, is important, Nvidia's current accounts receivable collection period is around 60 days, maintaining a normal level, indicating that it is not a situation where credit sales are uncollectible. Lee Ji-hwan stated, “If sales increase, accounts receivable naturally increase, and accounts receivable are what we commonly call credit sales.”

The status of Samsung Electronics and SK Hynix in the memory semiconductor market is changing, with Samsung Electronics expected to expand its share in the HBM (High Bandwidth Memory) supply chain. While Nvidia's operating profit margin and gross profit margin are declining, memory semiconductor companies' operating profit margins are projected to surpass Nvidia and TSMC. Lee Ji-hwan explained, “Samsung Electronics and SK Hynix are top in memory semiconductors, but their operating profit margin has fallen below Nvidia's and also below TSMC's,” emphasizing the changing status of the memory semiconductor industry.

While Politico's report sparked concerns about the Trump administration's comprehensive semiconductor tariffs, analysis suggests it is unlikely to lead to actual damage. Drawing parallels to past cases such as Hyundai Electric's power equipment, tariffs are used merely as a card for pressure and intimidation, and even if imposed, there is no one who benefits. Therefore, this semiconductor tariff issue is likely nothing more than a political card to pressure companies into investing in the U.S. Lee Ji-hwan remarked, “Tariffs are now being used as a card for pressure and intimidation, but in reality, no one benefits from actually implementing them.”

The completion dates for Samsung Electronics and TSMC’s local semiconductor factories in the U.S. are continuously being delayed, and the progress of construction is also very slow. Currently, the factories only have their exteriors completed, with internal equipment installation and actual production phases being delayed. Since semiconductor production is a complex process that cannot be achieved in a short period, factory operation delays are expected to continue for some time. Lee Ji-hwan explained the situation, saying, “The completion dates for the factories are constantly being delayed, and the progress of construction is very slow.”

Foreign investors showed a pattern of selling 10 million shares of Samsung Electronics over two days, then buying back 5 million shares. This suggests an overlap between short-term mechanical selling and long-term funds. Unlike mechanical selling, where positions are reduced due to fundamental changes in the company, the inflow of long-term funds is expected to continue given the scale of shareholder value enhancement. Lee Ji-hwan analyzed, “It seems like those who believe there’s a fundamental change and need to reduce their positions are doing so mechanically.”

Despite being a rising market, the current market shows a polarization of supply and demand, with more declining stocks than rising ones. Foreign mid- to long-term funds are concentrating on semiconductors and large-cap stocks, with a strong buying trend for specific stocks. Lee Ji-hwan noted, “The stocks that mid- to long-term foreign investors are buying are very narrow. They keep buying only the stocks they are interested in.” This is because foreign investors are strongly committed to buying certain stocks based on their price attractiveness. Individual investors need to be aware of this polarization in foreign investor supply and demand and approach the market from a mid- to long-term perspective rather than engaging in short-term rotation. The narrow range of stocks foreign investors are buying could lead to a rise centered on specific sectors and large-cap stocks rather than overall market activation, requiring individual investors to be cautious in their stock selection.

The criteria for selecting stocks within the power equipment sector are changing. Last year, growth momentum was an important investment criterion, but this year, earnings-based valuation has become more crucial. Foreign investors tend to prefer stocks with stable fundamentals, earnings, and attractive prices rather than those with strong short-term momentum. Lee Ji-hwan analyzed, “Last year, growth momentum was actually important. But now, from a foreign investor's perspective, they would prefer stocks with stable fundamentals, earnings, or prices over those with strong momentum.”

Regarding the composition of a power equipment stock portfolio, it was suggested that if one invested in LS Electric last year, Hyosung Heavy Industries holds more appeal this year. It was advised that it might be more advantageous to mix holdings based on Hyundai Electric and Hyosung Heavy Industries. This implies the need to assess prices against earnings using PER (Price-to-Earnings Ratio), and that advantageous stocks can change with market shifts. Lee Ji-hwan stated, “If you held LS Electric last year, Hyosung Heavy Industries would be more advantageous this year. This year, it might be more beneficial to go with a mix based on Hyundai Electric and Hyosung Heavy Industries.”

When semiconductor stocks undergo a significant correction, there might be a temptation to shift to KOSDAQ rotation, but it was advised that holding firm during this period is better. While market conditions can create psychological anxiety, for non-short-term traders, resisting such temptations and maintaining current holdings can be advantageous. Lee Ji-hwan emphasized, “Because you held such a large position in semiconductors, it’s a time when you might be tempted to switch to KOSDAQ, but isn’t it better to hold on even more when such temptations arise?”

Regarding the timing to sell semiconductor stocks, predicting tomorrow's stock price is difficult, but based on current price levels, PER standards, long-term contracts, and the confirmed demand for hyperscale next year, it was suggested that maintaining a holding perspective until at least October is advisable. Lee Ji-hwan explained, “Given that we’ve hit this price level, there’s a point where long-term contracts are coming in based on PER, and overall demand for hyperscale is confirmed for next year, shouldn't we sell at least by October?”