REFILE-Samsung Elec extends fall as most Korean shares steady
(Adds attribution to second quote to make clear it is trader speaking)
* Samsung Electronics underperforms for second day
* Investors pick out bargains, rotate into defensive plays
By Joonhee Yu
SEOUL, May 17 (Reuters) - Samsung Electronics shares extended their losing run on Seoul's main bourse on Thursday, falling as much as 2.2 percent as foreign investors continued to sell on the back of a report that major customer Apple Inc has placed a big chip order with a rival.
The Korea Composite Stock Price Index (KOSPI) was dragged into negative territory near market open on Samsung's fall, but was up 0.09 percent at 1,842.16 points as of 0220 GMT helped by a rebound in other sectors.
Shares in the tech-giant, which takes up 17 percent of KOSPI's total market capitalization, tumbled more 6.2 percent to its worst one-day fall in more three-and-a-half years on Wednesday, wiping out more than $10 billion of its value off the books, but it is still up more than 13 percent this year.
"Beyond the news itself, Samsung shares have heavily outperformed all year and overheating was already a concern. That combined with the macro-economic environment and news on Elpida helped to create a perfect storm," said a trader.
Despite the two-day skid, Samsung shares are still up 13 percent for the year, far outpacing the index which has gained 1 percent.
Japan's Elpida Memory Inc has been supplying more than 50 percent of its production of dynamic random access memory (DRAM) chip for mobile devices to Apple Inc since late last year, a source with direct knowledge of Elpida's sales breakdown said on Thursday.
This followed a similar, initial report by Taiwanese IT news site Digitimes released early on Wednesday.
The move has rattled investors, who fear that the move is a prelude to Apple Inc's shift away from traditional South Korean chip suppliers such as Samsung and SK Hynix towards Elpida and Micron, which is negotiating a bid to acquire the bankrupt Japanese chipmaker.
Samsung Electronics president and chief operating officer Lee Jae-yong was quoted by local media to have responded to the suggestions as "groundless", adding that Elpida Memory has already been a long-running Apple supplier.
"It was a good excuse to sell with sentiment already running low over Greek worries, but a closer look reveals that Elpida has fallen behind Samsung in the R&D cycle and boasts less advanced manufacturing processes. Chips account for a mere 15 percent of Samsung's revenue source in any case," the trader added.
The wider market was steady after heavy recent sell-offs, but investors held back from increasing their risk exposure with the deepening turmoil in Greece.
The European Central Bank said it has stopped providing liquidity to some Greek banks that have not been successfully recapitalized, highlighting the weak state of the banking sector in the indebted country.
Investors rotated into defensive plays and locked bargain bids on heavily battered sectors such as crude oil refiners.
Utilities outperformed, as Korea Electric Power Corp (KEPCO) jumped 6.3 percent higher Korea Gas Corp (KOGAS) shares soared 6.1 percent
SK Innovation, South Korea's largest crude-oil refiner, rose 4.8 percent while S-Oil, the country's third-biggest, climbed 3.8 percent.
(Reporting by Joonhee Yu; Editing by David Chance)
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