Societe Generale SA has switched its Asia chip stock preference to South Korea over Taiwan, saying the likes of Samsung Electronics Co. are better geared to profit from the end of the semiconductor downcycle.
(Bloomberg) — Societe Generale SA has switched its Asia chip stock preference to South Korea over Taiwan, saying the likes of Samsung Electronics Co. are better geared to profit from the end of the semiconductor downcycle.
Memory chip prices are stabilizing after an 18-month downtrend, and Korea’s “earnings gap with Taiwan tech is closing,” SocGen strategists including Frank Benzimra wrote in a note. “This should lead to higher relative re-rating of Korea tech, which is trading at less than half Taiwan tech valuations.”
SocGen’s move comes days after Citigroup Inc. analysts said Korea’s biggest chip player Samsung has won the right to supply HBM3 — a newer generation of memory optimized to work with artificial intelligence accelerator — to AI leader Nvidia Corp. from the fourth quarter.
Taiwan’s equity benchmark has risen 18% this year and is on course to outperform the Kospi Index for a third straight year. The Korean index is trading at about 58% discount to its Taiwanese counterpart on estimated price-to-book value, according to data compiled by Bloomberg.
SocGen joins Morgan Stanley and Fidelity International in signaling optimism that Korea’s chip industry will benefit from a boom in AI investments. The French firm’s strategists added that a bottom in the semiconductor cycle should spark a rebound in Korea’s earnings in the next quarter.
Benzimra and his team also upgraded Korea and slashed Taiwan in their Asia equities allocation, while flagging broader risks for regional stocks from China’s deleveraging, higher US interest rates and Bank of Japan’s policy normalization.
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