Samsung is the Korean Stock Market Lifeline

On July 30th, the stock market in South Korea was at the highest level it had been in, in the past 3 years. The key reasons for this growth was a new stimulus plan issued by the government that created optimism and a planned cut for the interest rate. After this growth, Samsung Electronics Co. took over. Following, the Korea Composite Stock Price Index (KOSPI) had dropped to a two-month low, which is approximately where they started at the beginning of the year.

The largest maker of televisions and smartphones, Samsung is primarily to blame for this sudden change. At the same time, the electronics giant makes up 14.4% of the overall capitalization of South Korea’s stock market. This total is approximately the same percentage of the five largest companies that follow Korea, combined. When Samsung has an itch, the market scratches.

Samsung has the biggest drop in more than two years, last week. Analysts were scrambling to lower outlook for profits, leading into the third quarter’s ending on Tuesday. The biggest concern is the competition that has increase by Apple Inc. and cheap competitors in China. After the release of iPhone 6 and its plus model, Apple has begun to steal some of Samsung’s core business. Three days after its initial release, Apple sold over 10 million iPhone 6 devices. 

Samsung shares have dropped over 10% for the current quarter. Last week, they saw their shares drop by 22%, following their jump in June. This cost the company $42 billion in less than 4 months, in market capitalization. Samsung’s presence within the KOSPI is 4 times larger than the next largest stock, which is Hyundai Motor Co.  Hyundai’s drop has added to KOSPI issues in the market. At the start of August, the value of their stock dropped by 22% to almost a three-year low.