Samsung shares fall 5% after broker downgrade

Shares in Apple rival Samsung Electronics fell more than 5% on Monday after broker Morgan Stanley lowered its target price and recommendation on the stock, saying it expected lower prices for the company's memory chips.

The broker cut its outlook on Samsung to "equal weight" from "overweight" and lowered its target price by 3.4% to Won2.8m.

Downside risk

In the report, issued on Sunday, Morgan Stanley said: "We see downside risk as NAND prices have started to reverse in the fourth quarter. Meanwhile, visibility on DRAM supply-demand dynamics has reduced beyond the first quarter 2018."

Seoul train - Samsung's products are ubiquitous in everyday life for young Koreans: Shutterstock

NAND and DRAM memory chips are two of Samsung's chief exports and are used in mobile appliances outside its own range of products. The company, however, was already aware of a tightening supply-demand position in the market and said in October that it expected this to continue next year.

Market reaction

Samsung Electronics fell 5.08% on Monday to Won2.632m. The shares, however, remain 31% higher on the year, thanks in large part to the success of Apple's launch of its iPhone X. Apple's shares are up a similar amount this year - 32% to $174.97.

The drop in Samsung's price had an impact on others in the Korean chip sector, leaving SK Hynix down 2.35% at Won83,100 and the overall Kospi Composite index in Seoul 1.44% lower at 2,507.81.