Logo of Phnom Penh Post newspaper Phnom Penh Post - Recovery of chip industry to boost Korean stock market

Recovery of chip industry to boost Korean stock market

Content image - Phnom Penh Post
SK hynix’s prices increased to 136,000 per share from 110,000 won. afp

Recovery of chip industry to boost Korean stock market

South Korea’s semiconductor industry is projected to walk the road to recovery next year, which will propel the local stock market in turn, recent reports by global investment banks said.

Most financial institutions upgraded their ratings of the stock market by one or two notches, and said the benchmark Kospi will trade at an average 2,300 points, higher than the corresponding figure of 2,100 points this year.

France-based financial institution BNP Paribas adjusted its rating on the South Korean market from underweight to overweight last week, saying the semiconductor market cycle has reached the bottom, and is set to start climbing next year. This signals a cyclical recovery.

Excess chip inventory – which has been detrimental to sales of new materials – will gradually dry up in 2020, along with a recovery in demand from data centers and smartphone manufacturers, it said in a report. It forecast the benchmark Kospi to be trading at an average 2,325 points.

In line with BNP Paribas, US-based Goldman Sachs last month also upgraded its valuation for the Korean market to overweight from market weight. It cited stabilization in the memory chip price, normalization of NAND and DRAM inventories and increase in demand for 5G services.

Another US-based firm, Morgan Stanley, shifted its equal weight recommendation to overweight and picked Samsung Electronics and chipmaker SK hynix among other tech stocks as attractive investments.

The Kospi is expected to see a rally on the back of a strong won, and the Korean equity market will have attractive valuations compared to other emerging markets, under the condition that tensions surrounding the US-China trade war do not further escalate.

The firm said that Kospi-listed firms’ profit will increase by 30 per cent at most next year, which echoes Credit Suisse’s latest briefing on the stock market on Thursday.

An official at the Seoul branch of the Swiss multinational firm said the profits of semiconductor, auto, refinery and chemicals will gain 30 per cent in 2020, compared to this year with the chips industry leading the rally.

Japan-based Nomura Securities raised its stock price target for Samsung Electronics and SK hynix based on the rising price of DRAM and overall anticipation surrounding the chip industry. Samsung Electronics’ price was raised to 67,000 won per share ($57.70) from the current 60,000 won and SK hynix’s increased to 136,000 per share from 110,000 won.

But not all institutions voiced rosy outlooks, with Citigroup rating the country’s stock market as underweight.

“We are not especially bearish, but can see better opportunities elsewhere,” it said in a note published November 29.

“While markets may overshoot into the new year, we would prefer to wait for the next dip before turning more bullish.”

Analysts often divide the global stock market into three categories – overweight, equal weight and underweight – based on their attractiveness.

THE KORE HERALD/ANN

MOST VIEWED

  • Without shoes or a helmet, a young cyclist steals the show

    Pech Theara gripped the curved handlebars of his rusty old bike, planted his bare feet on its pedals and stormed as fast as he could towards the finish line. The odds were against him as the 13-year-old faced off against kids with nicer bikes at

  • Phnom Penh-Sihanoukville expressway on schedule

    The construction of the more than $1.9 billion Phnom Penh-Sihanoukville Expressway has not been delayed despite the Covid-19 pandemic, with more than 26 per cent of the project completed and expected to finish in about two years, according to Ministry of Public Works and Transport secretary of

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • PM dispels lockdown rumours, gifts masks

    Prime Minister Hun Sen on November 12 denied rumours that he will lock down the country in response to increased Covid-19 fears, referring to them as propaganda aimed at destabilising the country. In a Facebook post, he said some people had spread rumours that the government

  • SilkAir adds flight to Phnom Penh schedule

    Silkair (Singapore) Pte Ltd is increasing its flight frequency between Phnom Penh and Singapore with a third weekly flight on Saturdays, according to Cambodia Airports’ Facebook page. The other flights offered are on Tuesdays and Sundays, with an estimated Phnom Penh arrival time at 5:35pm