SEOUL – South Korean chipmakers rallied as risk appetite returns after July’s rout, with a local media report of investment plans by Singapore’s Temasek supporting sentiment.
Shares of Samsung Electronics and SK Hynix extended gains to more than 8 per cent, after Asia Business Daily reported that Temasek plans to invest directly in the two chipmakers through its internal investment team, and is mulling timing. The benchmark Kospi gained as much as 5.1 per cent.
The chipmakers saw a brutal sell-off in July as doubts grew over the pace of rapid AI infrastructure buildout, leading to an unwinding of leveraged positions. The shares have been rebounding recently, amid growing expectations the companies will bolster shareholder returns with buybacks and more dividends.
SK Hynix on Aug 7 said it will unveil shareholder-return details in the third quarter. Samsung Electronics is expected to follow suit, with KB Securities analysts expecting a more than tenfold increase in shareholder returns.
Temasek didn’t immediately comment on the report when contacted by Bloomberg.
“This hints at long-term investors’ improving appetite for South Korea’s deeply-undervalued semiconductor sector,” said Homin Lee, a senior macro strategist at Lombard Odier Singapore. “More aggressive foreign institutions are likely to view these key names as an opportunity, especially if retail-driven volatility subsides.”
The valuations of the memory chipmakers have come down to record low levels following the July rout. Samsung and SK Hynix are trading at 4.2 and 3.6 times forward earnings, respectively, compared with more than 21 times for the Philadelphia Semiconductor Index of global chip peers.
Global funds added more than 2 trillion won ($1.4 billion) worth of Kospi shares as of mid-Wednesday, while retail traders sold.
If confirmed, the investment would signal “strong foreign confidence in Korea’s AI/memory cycle,” said Ha SeokKeun, chief investment officer at Eugene Asset Management. It would be one of the drivers supporting a Kospi rebound, he added. BLOOMBERG
