[THE INVESTOR] Global asset management firm AllianceBernstein has an upbeat outlook on Samsung Electronics for the second half of this year, despite its falling share price since the tech giant’s stock split.
“I think that Samsung’s current semiconductor business continues to look quite robust, which is a very attractive element of its current business case,” said David Wong, senior portfolio manager in equities for Asia Ex-Japan at AllianceBernstein. “But what we would say is more attractive about Samsung, compared to the past and to some other companies in Korea is, it is becoming much more explicit about its shareholder returns policy, which I think is a big part.”
As for the overall semiconductor industry -- notorious for “boom and bust” cycles -- it will continue to remain cyclical, but less volatile than in the past, he projected.
David Wong, senior portfolio manager in equities for Asia Ex-Japan at AllianceBernstein, speaks at a press conference in Seoul.
“Semiconductors will always be a cyclical industry. However, we would say the past cycles were very much accentuated by overinvestment, which we have not seen in recent times,” he said. “So the industry, whether it is memory or other types of logic semiconductors, will go through periods of stronger and weaker demand. That is more of a normal inventory cycle and it will hopefully not be as volatile as it was in the past.”
On the signs of improving inter-Korean relations recently, the analysts from the New York-based firm gave a rosy outlook on the stock market. “I don’t really think that the North Korean tensions are any longer a major concern at this time for international investors that are either looking at South Korea or other areas,” said Wong.
“We have been discussing the ‘North Korea risk’ since January,” said Yoo Jae-heung, senior portfolio manager of AllianceBerstein. “South Korea’s sovereign debt credit default swap premium is on the decline, which means the market views positively the easing tensions with North Korea.”
AllianceBerstein highlighted the US equity market as its top pick for investment, despite escalated trade war with China.
He believes the investors had already factored in the worst-case scenario of the trade spat into the market, wiping off US$3 trillion to US$4 trillion in US equity market cap, since earlier this year when a series of tariffs were announced by the two countries. But he recommended investors to stay cautious and be less exposed to industries that are most subject to tariffs.
“We are most bullish on the US, and we recommend a growth-oriented strategy for rest of the year and beyond,” he said. “The economy of the US remains robust and is in a very good shape after physical boost from tax reforms,” he said.
In specific, AllianceBerstein called on investors to pay attention to health care and tech industries, where firms have shown upward earnings revision trend. “Tech companies today are really not cyclical, and many of them have minimum exposure (from trade and policy) like for instance with China,” he said.
By Ahn Sung-mi (firstname.lastname@example.org)