Foreign investors have been rapidly reducing their holdings of Samsung Electronics (005930.KS) shares, sending the foreign ownership ratio to its lowest level since the global financial crisis. In addition, Samsung Electronics' weighting in the MSCI Emerging Markets Index (MSCI EM), a leading global benchmark, has fallen to less than half that of Taiwan's TSMC.
Foreign Ownership at Lowest Since 2009
According to the securities industry on the 3rd, Samsung Electronics' foreign ownership ratio stood at 46.7% as of that day's closing price.
After peaking in the 57% range at the end of 2020, the ratio had been on a downward trend, and large-scale selling by foreign investors this year pushed it below the 50% mark. The ratio, which exceeded 52% at the start of the year, has been driven down to the 46% range within seven months — the lowest figure since 2009, in the immediate aftermath of the global financial crisis.
The selling trend did not break on the 3rd either. According to Korea Exchange data, foreign investors sold 2.84 trillion won worth of shares on the main bourse that day, and Samsung Electronics alone saw net selling of more than 900 billion won, returning to a net-sell position for the first time in three days. Broadening the scope to the past month, foreign investors' net selling of Samsung Electronics reached 3.4 trillion won.
Presence Trails TSMC in MSCI as Well
Samsung Electronics' standing is also wavering within global benchmark indexes.
According to data from Hana Securities, Samsung Electronics' weighting in the MSCI Emerging Markets Index stood at just 6% as of July. TSMC's weighting in the same index was 15%, 2.5 times that of Samsung Electronics.
The gap in the two stocks' weightings was 9 percentage points, the largest in 11 years since 2015. Samsung Electronics gave back its weighting, which had once risen to 8% in June, to 6% within a month, while TSMC held steady at around 15%.
The scale of the stock's decline is also reminiscent of the 2008 financial crisis. Based on the intraday low on the 29th of last month, Samsung Electronics' share price was 48% below its previous peak. That is little different from the 47% maximum decline during the 2008 global financial crisis. Samsung Electronics closed at 239,500 won on the 3rd, plunging more than 8% from the previous day.
Lee Jae-man, a researcher at Hana Securities, said, "The gap in the MSCI EM weightings of Samsung Electronics and TSMC has widened to the greatest extent since 2015," diagnosing it as "the result of intensifying foreign underweighting of Samsung Electronics."
He added, "Samsung Electronics has a larger net profit, higher return on equity (ROE) and dividend yield, and a lower price-to-book ratio (PBR) than TSMC," stressing that "we are currently in a phase where the weighting reduction has been excessive relative to fundamentals, and whether foreign investors turn net buyers going forward will be the key variable for a rebound in Samsung Electronics and the KOSPI."
