Key Takeaways
- The Kospi index has climbed over 22% from its July 30 trough, officially entering bull market status
- Both Samsung Electronics and SK Hynix soared more than 5% during Thursday’s trading session, propelling the index higher
- According to KB Securities analyst Jeff Kim, these chip stocks remain “extremely undervalued” despite falling over 40% from previous highs
- Robust artificial intelligence infrastructure spending from major tech companies has bolstered memory chip demand outlook
- International investors continue withdrawing capital, removing over $100 billion from Korean equities year-to-date
Samsung Electronics and SK Hynix have roared back into the spotlight following a devastating July correction, with a leading analyst declaring both semiconductor stocks “extremely undervalued” as South Korea’s primary equity benchmark officially entered bull market status.
Samsung Electronics Co., Ltd., SMSD.L
The Kospi index climbed as much as 4.8% during Thursday’s session, pushing its cumulative advance from the July 30 bottom to approximately 22%. This milestone exceeds the widely accepted 20% threshold that marks a transition into bull market conditions.
The turnaround has been remarkably swift. Only weeks ago, the Kospi plummeted 22% during its steepest monthly decline since the 2008-2009 global financial crisis. The sharp downturn stemmed from forced liquidations of leveraged positions concentrated in semiconductor manufacturers.
Samsung Electronics and SK Hynix spearheaded Thursday’s advance, with each company posting gains exceeding 5%. Both corporations rank among the world’s leading memory chip manufacturers, with products experiencing heightened demand amid accelerating artificial intelligence deployment.
Significant Valuation Discount Identified
Jeff Kim, an analyst at KB Securities, noted that current market valuations for both companies fail to adequately reflect their earnings trajectory. Using Wednesday’s closing prices, Samsung Electronics trades at just 3.7 times its projected 2027 price-to-earnings ratio, while SK Hynix trades at 3.2 times.
Wall Street projections estimate Samsung’s 2027 operating profit at 575 trillion won, with SK Hynix expected to reach 389 trillion won. These figures represent increases of 13.2 times and 8.2 times their respective 2025 performance levels.
Kim highlighted that the disconnect between anticipated earnings expansion and present-day valuations suggests substantial potential for multiple expansion. He noted that forthcoming shareholder return initiatives at both corporations could serve as additional catalysts for share price appreciation.
Samsung’s planned shareholder distributions over the coming three-year period are anticipated to exceed 600 trillion won, delivering a dividend yield surpassing 7%.
Short-term financial performance also appears promising. Samsung is projected to deliver third-quarter 2026 operating profit of 112 trillion won, representing an 817% year-over-year surge. SK Hynix is forecast to generate 77 trillion won, marking a 579% annual increase.
Both corporations have secured more than 60% of their production capacity through multi-year supply agreements with cloud hyperscalers as memory chip pricing trends upward.
Challenges Remain on the Horizon
Notwithstanding the recent rally, market observers maintain a measured outlook. The Kospi remains approximately 24% beneath its late June pinnacle.
International capital has withdrawn more than $100 billion from Korean equity markets during the current year. Some offshore institutional investors have begun returning, attracted by compressed valuation multiples.
Wednesday’s softer-than-expected US inflation data also bolstered market sentiment by reducing concerns about additional Federal Reserve interest rate increases.
South Korea’s stock market exhibits heavy concentration in semiconductor-related enterprises. Market strategists caution this composition creates vulnerability to any reversal in artificial intelligence investment trends.
Financial authorities have implemented measures to minimize forced liquidation events, including restrictions on single-stock leveraged exchange-traded funds and enhanced margin lending requirements.
Market analysts advise that investors should temper expectations regarding the sustainability of recent momentum going forward.
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