Samsung Electronics, sudden change!
On November 15th, the South Korean Composite Stock Index (KOSPI) fell more than 1% during trading. However, later on, driven by chip stocks such as Samsung Electronics, KOSPI fluctuated and turned red. As of press time, the KOSPI index rose slightly by 0.09%, while Samsung Electronics rose by 7.21%, marking the largest daily increase since March 24, 2020. So, why did Samsung Electronics suddenly rise?
In the first four trading days, the KOSPI index has cumulatively fallen by 5.56%, while Samsung Electronics and SK Hynix have both fallen by over 13%. Analysts pointed out that Trump's victory in the election pushed the US dollar to strengthen and the interest rate of US treasury bond bonds to rise sharply, exerting downward pressure on the Korean stock market. In addition, if Trump raises tariffs on trading partners, South Korea's export driven economy may shrink.
The latest news shows that Citigroup has downgraded its rating on South Korean stocks from neutral to low-end. In addition, a report released by the US Treasury Department on Thursday local time showed that the US has reclassified South Korea as a target of currency manipulation observation.
Take a look at the detailed report!
Samsung Electronics' stock price rises
On Friday, Samsung Electronics' stock price suddenly surged, with an increase of over 8% at one point. On the news front, Samsung Electronics announced that it has reached a preliminary agreement with South Korea's major workers' union to increase wages by 5.1%. Samsung Electronics announced that union members will vote on the agreement for a week starting from the 14th, which includes more holidays, reward points for purchasing Samsung Electronics products, and other benefits. It is understood that the union has 36500 members, accounting for about 30% of Samsung Electronics' total Korean employees. The union went on strike in July, but the company stated that the strike did not result in any production interruptions.
In addition, recent South Korean media reported that Samsung has launched the development of HBM4 and may provide customized HBM4 memory for Meta and Microsoft, two AI cloud service giants, to integrate into their next-generation AI solutions. This also marks the first time that Samsung HBM4 technology will be adopted by mainstream customers.
In addition, there are reports that in order to enhance the competitiveness of the semiconductor industry, the ruling party of South Korea, the National Power Party, plans to submit the "Semiconductor Special Act" to the South Korean National Assembly, which will provide government subsidies and other support measures for the semiconductor industry. With the upcoming second term of US President Trump, there is increasing volatility in the global industry and trade sectors. The National Power Party of South Korea plans to accelerate the legislative process for supporting South Korean companies, such as the Semiconductor Special Act.
In the capital market, the South Korean stock market continued to decline this week. From Monday to Wednesday, the Korea Composite Index (KOSPI) fell by 1.15%, 1.94%, and 2.64% respectively, with a slight increase of 0.07% on Thursday. From a stock perspective, in the first four trading days of this week, South Korean chip stocks experienced significant declines, with Samsung Electronics experiencing a cumulative decline of over 12% and SK Hynix experiencing a decline of over 13%.
Experts generally believe that this is mainly due to market concerns about the Trump administration's trade protectionism, and its uncertainty is likely to persist for some time in the future. Market predictions suggest that Trump is likely to construct tariff barriers and implement tax reduction policies, which will drive the strength of the US dollar. Coupled with the strong momentum of virtual currency markets such as Bitcoin, this will lead to foreign investment flowing out of the South Korean stock market.
Analysts point out that with the Republican Party in the United States locking in a majority of seats in both houses of Congress, leading to increased policy uncertainty, the downturn in the South Korean stock market is likely to persist in the long term. NH Investment Securities researcher Jin Yinghuan analyzed that it is difficult to find an opportunity for the stock market to rebound in the near future, at least until the new US government is established and its specific policies are proposed.
Recently, due to growing doubts about how low the Federal Reserve will lower its benchmark interest rate next year, the US dollar has been rising. The Trump administration's expectation of accelerated inflation, partly due to tariff hikes, further propelled the rise of the US dollar this month. This appreciation has put significant pressure on net importers of US dollar denominated commodities such as oil, as well as countries burdened with US dollar denominated debt.
Trump's victory in the election boosted the strength of the US dollar and the interest rate of US treasury bond bonds, exerting downward pressure on the Korean stock market. In addition, South Korea's economy is an export-oriented economy that heavily relies on exports. If Trump increases tariffs on trading partners, South Korea's economy will be greatly affected. Recently, the Korea Institute for International Economic Policy released a research report stating that if Trump fulfills his promise to impose the highest level of universal tariffs, South Korea's GDP will shrink by about 0.67% next year and exports will decrease by $44.8 billion.
South Korea is listed by the United States as a target of currency manipulation observation
On November 14th local time, the US Treasury Department released its exchange rate policy report for the second half of 2024, placing South Korea on a watch list for currency manipulation, which still includes Japan and Germany. The above report covers the four quarters up to June 2024.
In the report, the US Treasury Department also concluded that no major trading partner of the United States manipulates the exchange rate between its currency and the US dollar to prevent effective balance of payments adjustments or unfair competitive advantages in international trade.
Since April 2016, South Korea has been placed on the observation list for 14 consecutive times. In November of last year, it was removed from the list after a gap of more than 7 years. It was also excluded in the first half of this year, but was listed again in the second half of the year.
There are three criteria for the United States to designate exchange rate manipulation observation objects, namely, a trade surplus of over 15 billion US dollars with the United States; The current account surplus accounts for more than 3% of the gross domestic product (GDP); In the past 12 months, there have been at least 8 net purchases of US dollars, with a scale accounting for more than 2% of GDP. As long as two of the conditions are met, it will be listed as an observation object.
This time, South Korea's trade surplus and current account surplus with the United States exceeded the standard and were included in the observation list. The US Treasury Department stated that as of the end of June 2024, South Korea's current account surplus accounted for 3.7% of GDP. The trade surplus with the United States increased from $38 billion the previous year to $50 billion this year.
Recently, the South Korean government took "verbal intervention" measures on the 14th after the Korean won fell below the 1400 won mark against the US dollar. On the same day, South Korean Deputy Prime Minister and Minister of Planning and Finance, Choi Sang mu, presided over a macroeconomic and financial conference at the Seoul Metropolitan Bank. He stated that the current policy tone of the new US government, as well as the global economic growth, price trends, and monetary policies of major countries, are full of uncertainty. The South Korean government will closely monitor market dynamics through a 24-hour joint monitoring mechanism and respond to possible fluctuations in a timely manner.
Cui Xiangmu pointed out that if the financial and foreign exchange markets experience excessive volatility, relevant departments should take timely and proactive measures to stabilize the market. This is the second verbal intervention in the foreign exchange market by the South Korean foreign exchange department after 7 months. In mid April, due to factors such as the tense situation in the Middle East, the foreign exchange market experienced severe fluctuations, and the Korean won fell sharply against the US dollar. At that time, the South Korean government immediately intervened verbally.