Samsung Electronics Falls 4.09%, SK Hynix Drops 5% as Chip Stocks Slide

Samsung Electronics down 4.09% at 247,000 won

SK Hynix down 5% at 1.568 million won

Samsung Electronics Co. and SK Hynix Inc. fell in early trading on Aug. 25 after Nvidia Corp. and other major US technology and semiconductor stocks retreated overnight, triggering profit-taking in South Korean chip names.

Disappointment over Samsung Electronics’ newly announced shareholder return plan added to the pressure. Investor caution ahead of Nvidia’s earnings also weighed on sentiment, spreading the selloff across the broader semiconductor sector.

As of 9:15 a.m., Samsung Electronics was trading down 4.09% at 247,000 won, while SK Hynix fell 5% to 1.568 million won. SK Square Co. dropped 5.76% to 1.009 million won, Samsung Electronics preferred shares fell 2.96% to 182,600 won, and Samsung Electro-Mechanics Co. slid 5.39% to 1.228 million won.

The weakness followed overnight moves on Wall Street, where profit-taking hit megacap technology and chip stocks. The Dow Jones Industrial Average rose 0.3%, while the S&P 500 fell 0.3% and the Nasdaq Composite dropped 0.8%.

Micron Technology Inc. tumbled 5.9%, SanDisk fell 6.5%, and Nvidia lost 2.9%. Advanced Micro Devices Inc. and Broadcom Inc. declined 3.49% and 2.63%, respectively. SanDisk and Seagate Technology Holdings Plc each fell more than 6%, highlighting broad-based selling across semiconductor and technology shares.

The pullback in Korean chip stocks that began after Samsung Electronics announced its shareholder return plan appears to have coincided with weakness in US semiconductor shares. Nervousness ahead of Nvidia’s earnings has also intensified.

Nvidia has now fallen for seven straight sessions, its longest losing streak in four years. The move has encouraged investors to trim exposure across the chip sector in advance.

In South Korea’s regular session on Aug. 24, Samsung Electronics came under selling pressure after announcing after the market close on Aug. 21 a shareholder return program worth 90 trillion won to 110 trillion won. Lee Kyung-min, an analyst at Daishin Securities Co., said Samsung affiliates broadly weakened after the company’s shareholder return policy fell short of market expectations.

Some in the market say the investor relations practices at Samsung Electronics and SK Hynix do not meet global standards. One industry official said it was disappointing that investors were left to interpret key details themselves after the companies postponed specifics on the size and timing of share buybacks and cancellations.

“It makes you wonder whether this is really the best Samsung can do on IR,” the person said.

The official added that Samsung Electronics and SK Hynix are no longer companies focused only on the Korean market, but established global leaders. Their IR practices should reflect that status. Giving investors information that is as specific and predictable as possible, and communicating actively with the market, would help lift corporate value, the person added.

Still, securities firms say there is little reason to conclude semiconductor-stock fundamentals have been damaged. Memory prices and earnings forecasts have not shown clear signs of weakening, suggesting the recent decline is closer to a short-term flow-driven move tied to fading expectations for shareholder returns and caution ahead of Nvidia’s results.

Han Ji-young, an analyst at Kiwoom Securities Co., said South Korea’s stock market may attempt a rebound. He cited perceptions that the correction in US chip stocks had already been partly priced in, easing bond-yield pressure, weaker oil prices and bargain buying after the previous session’s sharp decline.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com