South Korean stocks fell into correction zone for a while. How did Samsung save them?

South Korean shares fell briefly into the correction zone during the session on May 18. They declined following the shares of the whole Asia-Pacific region, which fell against the background of rising yields of global government bonds due to renewed concerns about inflation, Bloomberg writes. However, two hours after the start of trading, the South Korean stock index Kospi was able to recoup losses and go into the plus side relative to Friday's closing: pressure from the debt market helped offset optimism about possible progress in negotiations between Samsung Electronics and the union - the markets are hoping for a possible prevention of a large-scale strike.

South Korean stock index Kospi ended trading on Ma. 18 in the green zone - added 0.31% against the previous closing. Moreover, it managed to achieve such a result despite the fact that in the first hours of the session at the minimum it fell by as much as 4.7% - such a decline threw the index into the correction zone, Bloomberg notes (as early as May 15, Kospi updated its historical maximum - at 8046.78 points - and in the next trading session collapsed by more than 11% relative to this mark, to 7142.71 points). The South Korean shares eventually recovered these losses due to optimism about progress in negotiations between Samsung and its workers' union. This dialog should prevent a large-scale strike of the company's employees, which, according to the warnings of the South Korean government, could cause serious damage to the country's economy.

Against this background, the securities of Samsung Electronics in Korea added almost 4%. Negotiations between the company's management and the union are expected to resume on Ma 18. Earlier, the company's employees threatened Samsung with an 18-day strike from Ma 21 - against the background of the chipmaker's successes due to the AI boom, Samsung employees are demanding to increase bonuses and fix a new system of payments for them. More than 41,000 people may take part in the protest action.

Such dynamics of the South Korean stock market once again emphasizes its fragility and dependence on the growth of shares of technology giants like Samsung and SK Hynix, Bloomberg notes. Last week, according to the agency, investors around the world sold Korean shares for a record $13 billion, taking profits after a sharp rise in the securities of two Korean memory chip makers (Samsung has added more than 134% since the beginning of the year, SK Hynix - 182%). Kospi over the same time rose by more than 78%.

"The current correction appears to be largely due to profit taking and the natural reaction [of investors] to the market's sharp rise," noted Kim Dojun, chief investment officer at Zian Investment Management (quoted by Bloomberg). - In a market that has risen sharply, any profit-taking signal tends to cause an overreaction," he added.

At the same time, Eugene Asset Management Chief Investment Officer Ha Seok Keun noted that he does not regard the latest decline in the Kospi "as the beginning of a structural downtrend": "Rather, we are talking about a healthy price correction," he pointed out, emphasizing that he believes "attractive buying opportunities for quality stocks" in South Korea are now reopening.

This article was AI-translated and verified by a human editor