By Kim Rahn
Financial authorities said Wednesday that they will keep a close eye on movements of shares in Samsung Electronics to see whether there has been any manipulative activity involved in recent price swings.
The move came after suspicions of manipulation because of a selling spree led by foreign investors that is considered unusual.
The rush of selling started last Friday after JPMorgan Chase cut its target price for Samsung's shares from 2.1 million won to 1.9 million won, as well as decreasing its 2013 earnings estimate by 9 percent, as it expected poor sales of Galaxy S4, Samsung's latest flagship smartphone.
Morgan Stanley also lowered its target price by 50,000 won to 1.75 million won, forecasting that the orders for the smartphone would be smaller than initially expected.
Officials of the Korea Exchange (KRX) said they have intensified monitoring on Samsung Electronics-related trades.
"Samsung Electronics is one of highest priced, largest traded stocks. A price decrease of that stock is having an impact to the whole stock market, so we are closely watching the trade," KRX director Cho Byeong-hwan said.
They are watching any unusual trading patterns such as: whether the sales have been made through specific accounts; and whether specific investors have enjoyed huge gains through the price dipping.
Some types of future or put option trade, which investors can have gains when stock price falls, are especially under scrutiny.
If they find something suspected of being illegal, they refer the case to the Financial Services Commission.
The Financial Supervisory Service is also watching the situation. "We are monitoring any unusual issues. We haven't launched an official inspection yet," an official said.
Since Samsung's stock price began plummeting, analysts have said that the amount of shares sold by foreign investors and some sales patterns were unusual.
Last Friday, a day after the JPMorgan report came out, Samsung's shares worth 1.5 trillion won were traded, a 278.7 percent rise from the previous business day.
Of them, 114 billion won was from short stock selling, which is usually made by foreign investors. This amount was up by 588.6 percent from the previous business day.
Following such massive selling, the ratio of Samsung Electronics' shares held by foreign investors was lowered from 50.4 percent at the beginning of this year to 48.8 percent Tuesday.
"There had been similar cases that foreign investors sell Samsung Electronics' stock after a foreign investment bank presents negative outlooks," researcher Byeon Han-jun of KB Investment & Securities said. "But still, the selling streak this time is too extreme. Rumors are that a huge amount of shares are still on the waiting list for additional sales."
Jeon Sung-hoon, researcher at the Hana Daetoo Securities, said the outlook on the JPMorgan report, which forecast a weak demand of smartphones, was not new but foreign investors are reacting to it now.
"Korean analysts had already presented similar reports since last September, saying the high-end handset markets were saturated. The market all knew that, and the JPMorgan and Morgan Stanley reports are fussing around belatedly. And foreign investors are reacting to the reports. I don't know why," he said.