South Korean chip giants extended their gains on Wednesday, buoyed by a return of risk appetite after last month's sharp sell-off and traders digesting a local media report that Singapore's Temasek Holdings plans to invest in Samsung Electronics and SK hynix. According to the report, Temasek aims to directly inject capital into the two chipmakers through its internal investment team and is currently evaluating the timing of entry. Spurred by this news, shares of Samsung and SK hynix briefly expanded gains to over 8% during intraday trading, while South Korea's benchmark Kospi index surged 5.1%.
Homin Lee, Senior Macro Strategist at Lombard Odier Singapore, noted, "This suggests that long-term investors' interest in South Korea's deeply undervalued semiconductor sector is heating up. If retail-driven volatility stabilizes, more aggressive foreign institutions are likely to see such core targets as opportunities to position themselves." As of press time, Temasek has not responded to the report.
Both chip giants experienced a massive sell-off in July, largely due to market concerns about the sustainability of excessively rapid AI infrastructure expansion, which led to a concentrated unwinding of leveraged positions. Recently, however, their share prices have been recovering as expectations grow that the two companies will enhance shareholder returns through share buybacks and increased dividends. SK hynix announced last Friday that it would disclose details of its shareholder return plan in the third quarter. Samsung Electronics is expected to follow suit, with KB Securities analysts predicting its shareholder return scale could increase more than tenfold from current levels.
Following the July downturn, valuations of memory chip manufacturers have fallen to historic lows. Samsung and SK hynix trade at forward P/E ratios of 4.2 times and 3.6 times, respectively, while the global chip industry benchmark, the Philadelphia Semiconductor Index, boasts a P/E ratio of over 21 times. By Wednesday's intraday trading, global funds had net purchased over 2 trillion Korean won (approximately $1.4 billion) in Kospi components, while retail investors were net sellers. Ha SeokKeun, Chief Investment Officer at Eugene Asset Management, pointed out that if the Temasek entry is confirmed, it would send "a clear signal of strong foreign confidence in Korea's AI/memory cycle" and could serve as a key driver supporting the Kospi rebound.
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