Morgan Stanley, JPMorgan Call 30%-40% Drop in Memory Chip Stocks a Buying Opportunity
Summary
- Global investment banks including Morgan Stanley and JPMorgan said recently battered memory chip stocks now look like a buy-the-dip opportunity.
- They said memory prices will rise at least 25% in the third quarter from the previous quarter, underscoring that the current weakness is a buying opportunity.
- JPMorgan said the fundamentals of the South Korean stock market, including Samsung Electronics and SK Hynix, remain solid, and that foreign selling was driven by MSCI Emerging Markets investor inclusion limits.
Forecast Trend Report by Period
Global investment banks including Morgan Stanley and JPMorgan say the recent plunge in memory-chip shares has created a buying opportunity. With the semiconductor shortage still persisting, the stocks have become more attractive after falling 30% to 40% from their peaks.
The Kospi closed 3.56% higher at 6,747.95. The benchmark rebounded after tumbling for two straight sessions following its recovery of the 7,000 level on July 15. Samsung Electronics climbed 6.15% to 259,000 won, while SK Hynix rose 4.08% to 1.836 million won. Both stocks rebounded for the first time in three trading days.
The advance in the Kospi, led by semiconductor shares, appeared to reflect global investment bank views that the recent correction in chip stocks had been excessive. In a July 20 investor note, Morgan Stanley analyst Joseph Moore wrote that conversations with data-center procurement managers showed "absolutely no sign of easing" in the severity of the memory shortage. He projected memory prices would rise at least 25% in the third quarter from the previous quarter. Moore added that while downturns are inevitable in the cyclical semiconductor industry, the current weakness is a buying opportunity.
Morgan Stanley took that view after sharp declines in memory-chip stocks. Micron has fallen 31.04% from its 52-week high, Sandisk 40.92%, Samsung Electronics 30.84% and SK Hynix 38.53%.
Mixo Das, JPMorgan's head of Korea equity strategy, said the fundamentals of the South Korean stock market remain solid despite some concerns. JPMorgan attributed heavy foreign selling to index inclusion caps. Foreign investors have been net sellers of more than $110 billion worth of South Korean equities this year, Das said. He said the market capitalizations of Samsung Electronics and SK Hynix had become so large that they exceeded MSCI Emerging Markets investor inclusion limits, leaving foreign investors little choice but to reduce their weightings.
Kang Jin-gyu, Hankyung.com reporter josep@hankyung.com
Korea Economic Daily
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