(Aug 12): South Korean chipmakers rallied as risk appetite returned after last month’s rout and traders weighed a local media report that Singapore’s Temasek Holdings Pte Ltd plans to invest in Samsung Electronics Co and SK Hynix Inc.

Shares of the chip duo briefly extended gains to more than 8% after Asia Business Daily reported that the state fund plans to invest directly in the two chipmakers through its internal investment team, and is mulling timing. Samsung ended the day up 6.7% while SK Hynix rose 5.5%. The benchmark Kospi gained 3.7%. 

Temasek said in response to queries from Bloomberg News that it did not seek advice from the South Korean government on the timing of investments in either SK Hynix or Samsung, and that it first invested in both companies more than two years ago.

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 buy-backs and more dividends.

“It is a positive confidence signal, but I would not see it as a game changer or the main driver of the Kospi rebound,” said Albert Yong, a managing partner of hedge fund Petra Capital Management, referring to the local report. “Samsung and SK Hynix had become technically oversold despite still-strong fundamentals.” 

SK Hynix last Friday said it will unveil shareholder-return details in the third quarter. Samsung Electronics is expected to follow suit, with KB Securities Co analysts expecting a more than 10-fold increase in shareholder returns. 

The valuations of the memory chipmakers have come down to record low levels following the July rout, when both stocks plunged more than 20%. 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 nearly US$2 billion (RM8.2 billion) worth of Kospi shares on Wednesday, while retail traders sold.

If confirmed, the investment would signal “strong foreign confidence in South Korea’s AI/memory cycle,” said Ha SeokKeun, the chief investment officer of Eugene Asset Management. It would be one of the drivers supporting a Kospi rebound, he added. 

Uploaded by Tham Yek Lee