Samsung’s shares drop below 40,000 won level

Shares in mighty Samsung Electronics fell into the 30,000-won range for the first time since a share split in May.

Samsung shares closed at 38,950 won ($34.38) Friday, down 2.63 percent from Thursday’s close.

In late January, the country’s biggest company announced it would split its shares 50-to-1 to encourage more trading by retail investors and improve long-term corporate value. At the time, Samsung shares were trading at around 2.5 million won per share

When the shares were split on May 4, they closed the day at 51,900 won. Ever since, the company has been unable to keep the share price above 50,000 won, as they traded in the 40,000-won range.

But on Friday, that psychological barrier broke and Samsung shares at one point fell as sharply as 3 percent, losing 1,200 won to reach 38,850 won.

Friday’s close was the lowest the company faced this year.

Investors are worried about slowing demand for semiconductors and its effect on the company’s performance.

In addition, a prosecutorial raid on Samsung BioLogics and Samsung C&T on Thursday played a major role. While Samsung BioLogics’ investigation was expected - the Financial Service Commission has accused the biopharmaceutical arm of Samsung Group of accounting fraud - the raid on Samsung Group’s de facto holding company, Samsung C&T, was not.

The prosecutors are investigating whether inflating the value of Samsung BioLogics through alleged accounting fraud was part of a plan to strengthen heir apparent Lee Jae-yong’s control over the country’s biggest conglomerate.

Samsung C&T is the biggest shareholder in Samsung BioLogics, with a 43.44 percent stake, while Samsung Electronics is the second, with a 31.49 percent. Raising the value of the biopharmaceutical company was considered a big factor in the National Pension Service’s approval of a merger of Samsung C&T and Cheil Industries in 2015.

Brokerage firms are already revising their outlooks on Samsung Electronics’ shares. Shinyoung Securities lowered its target share price for Samsung Electronics from 56,000 to 52,000.

“As lower demand has been pushing down the prices of semiconductors, the weakening performance of [Samsung Electronics’] semiconductor business is becoming more apparent,” said Lee Won-sik, a Shinyoung Securities analyst. “Next year the price competition will become more fierce and as the governance [of Lee Jae-yong] becomes less certain, it is difficult to know when [Samsung Electronics’] shares will bounce back.”

Daishin Securities also lowered its target from 58,000 won to 55,000 won.

Yuanta Securities, which set its target price at 76,000 won in May, has lowered it to 52,000 won, while BNK Securities lowered its target from 60,000 won earlier this year to 55,000 won.

“Samsung Electronics’ fourth quarter operating profit is expected to shrink from an initial projection of 14 trillion won to 13.2 trillion won,” said Dexter Lee, research associate at Samsung Securities. “It is hard to say [the overall semiconductor] market is on a downward slide, but uncertainties such as delays in semiconductor purchases and demand for smartphones is growing.”

Yoo Jong-woo, an analyst at Korea Investment & Securities, said DRAM chip prices are expected to fall 8 percent in the fourth quarter compared to the previous quarter, and NAND chips will fall around 18 percent to 20 percent.

“The burden on prices are likely to further increase with memory companies’ inventories rising rapidly,” Yoo said.

BY CHO HYUN-SOOK, LEE HO-JEONG [lee.hojeong@joongang.co.kr]