Samsung disappoints with lower-than-expected net profit and drags chips down in Asia; Fed maintains interest rates
Shares of the South Korean company fall up to 5% after the result and postponement of the shareholder return plan; Warsh avoids signaling next step and market sees rise in December
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM BLOOMBERG TELEVISION · 4 MIN
Samsung Electronics shares fell around 5% this Thursday in Seoul, after the company reported third-quarter net profit below estimates. The movement pulled Kospi down, with a drop of more than 2%, and contaminated the semiconductor sector in Asia, according to Bloomberg Television.
The stumble, however, was below the operating profit line. According to the station's reporter, the operating result was in line with projections, and the deviation is linked to factors such as bonuses for employees in the semiconductor area, high depreciation in the foundry division and intense investment on this front. The chip division, with an operating profit 15 times greater than that of the previous year, was still below expectations, around 2 trillion won according to the presenter. Samsung recorded the fourth consecutive quarter of record results and was the first major global technology company to surpass the 1 trillion dollar mark in quarterly operating profit, according to the report.
Shareholder return due in January
For an analyst interviewed by the program, the main reason for the negative reaction was the postponement: the market expected a new round of share buybacks or dividends, and the company left the announcement until the end of January. Samsung indicated an additional return of 55 to 70 trillion won this year (the range was cited as 55 to 75 trillion elsewhere in the broadcast). The current policy, valid from 2024 to 2026, foresees returning 50% of free cash flow.
The investment plan for 2026 was set at 80.3 trillion won, an increase of about 60% over the previous year's 52.7 trillion. Of this total, 76.8 trillion, or approximately 90%, goes to chips. The company also reported having signed ten multi-year contracts with major clients.
CLSA analyst Sanjeev Rana assessed that the deviation was small and likely linked to the strength of the won, and projected tight memory supply for three to five years, possibly until 2030. According to him, Samsung's stake in HBM rose to more than 30% this year, from 20% last year, while demand remains well above supply. Chinese manufacturer CXMT, in turn, advanced to 9% to 10% of the DRAM market, against 1% to 2% in 2021.
Fed maintains interest rates and leaves December open
In the United States, the Fed maintained interest rates by 10 votes to 2, without offering a clear signal about the next step, and Treasury yields fell. Chairman Kevin Warsh said more information will help the committee define the stance needed to return inflation to the 2% target. According to the broadcaster, the market prices a probability of around 80% to 90% of an increase in December, and Larry Hatheway, from Franklin Templeton, considered these chances to be reasonable, with a possible second increase in March, dependent on data.
Warsh also announced that the Fed will hold eight meetings per year, but, starting in 2027, one of them will be dedicated to strategy, without a vote on interest rates or a statement. In 2028, according to the report, only six will have a monetary policy decision. For strategist Andre da Silva, from MLIV, this tends to bring more volatility and less transparency to the interest rate market.
Balance sheets in China and the message to investors
In mainland China, stocks opened lower, with the CSI 300 losing around 1% and optical components stocks among the biggest losers, down as much as 16%. According to Bloomberg Television, the contrast with the United States shows that the Chinese market punishes even decent results, given a very high bar of expectations. Benches went up in several Asian squares, which the reporter interpreted as a search for protection.
PetroChina saw a 22% increase in net profit and a 10% increase in revenue, driven by oil. Unitree recorded 70% higher revenue, but 17% lower net profit, due to R&D expenses that grew 250%. Today, BYD is the main focus of the day: short interest in the stock has fallen to a seven-month low, and investors want to see if the company can make more money, and not just sell more cars, amid doubt about the target of 5.5 million vehicles for the year.
Automatically translated from Portuguese.
