SEOUL/TAIPEI -- Samsung Electronics shares on Tuesday clawed back some of their losses triggered by a downgrade of the semiconductor industry by investment bank Morgan Stanley at the weekend, although other stocks in the sector remained weak for a second day.
Samsung shares rose 1.22% to 2,664,000 won on Tuesday, after they marked the biggest one-day fall this year of 5.08% on Monday. Institutional investors led the partial rebound with net buying of 37.4 billion won ($34.5 million). The benchmark KOSPI edged up 0.25% to 2,514.19 on the back of gains made by Samsung, the bourse's largest chip.
"It is foreseeable that Samsung will continue to enjoy high profits in the fourth quarter this year and the first half of next year," said Kim Hyung-ryul, a senior analyst at Kyobo Securities. "It is too early to change expectation for this."
Samsung posted record high earnings in the third quarter led by its thriving semiconductor business. The company's net profit soared 179.5% to 14.5 trillion won for the July-September period year-on-year, with sales jumping 29.8% to 62.0 trillion won. Its net profit attributable to shareholders spiked 150.4% to 11.0 trillion won in the same period.
But most chipmakers in Asia continued to lose ground on Tuesday. Morgan Stanley downgraded the semiconductor and tech hardware industries in Asia's emerging markets to "equal weight" from "overweight" on Sunday. The U.S. investment bank said it saw downside risks as NAND prices have started to reverse in the fourth quarter.
"Our discussions with memory customers and vendors in Asia last week suggest that NAND pricing is likely to fall more rapidly than the market expects," said Shawn Kim, an equity analyst at Morgan Stanley. "There are signs of demand destruction from mobile memory content, and enterprise SSD (hard drive) prices have started to fall in the fourth quarter of 2017."
Shares in SK Hynix, South Korea's second-largest chipmaker, slipped 0.6% to 82,600 won, extending a 2.35% fall on Monday.
Taiwanese chipmakers were also hit by the negative report. Shares in Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker and a key Apple supplier, shed 4.11% in the past two trading sessions to close at 234 New Taiwan dollars.
Nanya Technology, the world's fourth largest dynamic random access memory maker behind Samsung, SK Hynix and Micron, also saw its stock price drop more than 4% in the past two trading sessions to close at NT$83.2 on Tuesday. So far this year, however, TSMC's shares have climbed more than 28% while shares of Nanya Tech have surged more than 72%.
TSMC's smaller rival United Microelectronics (UMC), the world's third largest contract chipmaker, fell 0.94% on Monday but inched up slightly to close 0.32% higher at NT$15.85 on Tuesday. UMC's shares have gained nearly 40% so far this year.
Shares in China's state-backed contract chipmaker Semiconductor Manufacturing International Co., tumbled 6% this week to close at 11.2 Hong Kong dollars on Tuesday, but they are still up 60% over the past three months.
"Shares of almost all of the world's leading chip related companies have advanced so much this year especially those of memory chipmakers," said Sean Yang, an analyst at Shanghai-based research company CINNO. "The share movements in the past two days are more like seasonal adjustment to reflect a low season ahead. Some investors just want to take profits from the previous bullish run."
Yang added that the share movements had nothing to do with a wider trend as chips are "so essential" for electronic devices. Yang said his agency sees DRAM prices continuing to rise in the first quarter of 2018 compared with the current quarter, while the price of NAND flash memory would stay flat or correct slightly. "For all 2018, we don't see serious supply-demand imbalance for memory chips, including DRAM and NAND flash memory," Yang said.
Japanese companies in the semiconductor sector were also shaken by the Morgan Stanley report. Tokyo Electron dragged the Nikkei 225 Index lower on Tuesday, dropping by 2.8% to 22,280 yen per share. Shares in Nitto Denko Corp., the second biggest contributor to Nikkei's fall, edged 2.33% lower to 10,685 yen.
Shin-Etsu Chemical was also a contributor, falling by 1.42% on the day to 12,420 yen. The Nikkei 225 lost 9.75 points, tipped into negative territory by the tech companies.
Nikkei staff writer Shotaro Tani in Tokyo contributed to this story.