Fled in Fear After the Crash... Is It Time for Individual Investors to Re-enter Samsung and SK Hynix? [Weekend Money]

LS Securities: "A Bargain Hunting Opportunity for Short-Term Rebound"

Since July, the Korean stock market has experienced a sharp decline, entering a 'panic sell' phase where fear-driven sell-offs have taken place. Some experts have assessed that the scale of the sell-off is excessive compared to market fundamentals, suggesting that this period may offer an opportunity for short-term rebound through bargain buying.

On July 11, LS Securities analyzed that the recent sharp market decline was driven by heightened skepticism regarding the sustainability of artificial intelligence (AI) investments and, following Samsung Electronics' earnings announcement, profit-taking in semiconductor stocks after positive news was released.

It was also noted that, amid the continued weakness in the stock market, renewed geopolitical risks involving the United States and Iran have triggered certain aspects of panic selling.

However, LS Securities emphasized that, since the market has entered a panic sell zone, a short-term rebound may be expected. Jung Daun, a researcher at LS Securities, stated, "While we agree that the AI cycle will persist, we have assessed that volatility could increase in the run-up to the midterm elections," adding, "In the short term, we are at a level where a rebound led by Samsung Electronics and SK hynix can be expected."

Jung explained, "Compared to the appropriate KOSPI price-to-book ratio (PBR) level of 2.30 times, the current PBR has dropped significantly to 2.05 times, so this is a time when investors can afford to be more courageous," and added, "Current concerns in the semiconductor sector are focused on margin rates, not a peak-out of profit levels, so bargain buying at current price levels is a reasonable response."

He further stated, "Looking back at previous semiconductor cycles in 2017 and 2021, the stock price peak typically occurred while profit consensus was trending upward," and explained, "Rather than an immediate shift to a downtrend, there was a period of increased volatility and a phase in which the reasoning behind changes in earnings forecasts was verified."

He added, "Whether the current AI cycle will shift into a downtrend like in 2017 and 2021 ultimately depends on confirming an increase in semiconductor volume (Q)."

This content was produced with the assistance of AI translation services.