- Samsung Profit Misses Estimates as Stronger Won Hits Sales
Samsung Electronics Co. reported lower-than-projected profit as it lost momentum in memory chips and faced a strengthening South Korean won.
Operating income rose to 15.1 trillion won ($14.2 billion) in the three months ended December, according to preliminary results released Tuesday. That compares with the 16.1 trillion-won average of analysts’ estimates compiled by Bloomberg. Shares of Samsung fell 1.6 percent to 2,559,000 won in early trade.
Prices for benchmark memory chips have leveled off after a year of strong gains, limiting the growth that had powered Samsung to record earnings in the past two quarters. That has combined with rise of about 7 percent in the won against the dollar in the fourth quarter to erode the value of profits earned abroad. Still, rising demand for organic light-emitting diode screens helped to fuel a rise in sales to 66 trillion won in the quarter, compared with the 67.6 trillion won analysts expected.
“The exchange rate probably undercut the earnings by 300 to 400 billion won,” said Greg Roh, an analyst at HMC Investment Securities Co. “Given special bonuses as well as a lot of marketing expenses for smartphones and televisions in the fourth quarter, we can expect a steep rise in the first-quarter operating profit to 15.9 trillion won.”
Samsung, based in Suwon, South Korea, leads in the next generation of screens called organic light-emitting diodes. It supplies OLED screens for Apple Inc.’s iPhone X even as the two companies vie for dominance in the global smartphone market.
Samsung won’t provide net income or break out divisional performance until it releases final results later this month.
Samsung’s shares hit record highs in 2017 before sliding in November after Morgan Stanley downgraded the stock citing an expected peak in the memory chips cycle and a slowdown in smartphones.
South Korea’s government this month warned about the rise in the won and said it will take steps in the case of one-sided moves in the nation’s currency.
“The won-dollar exchange rate is worrisome,” Lee Seung-woo, an analyst at Eugene Investment and Securities, said in a report before the announcement. “The first quarter earnings are expected to be 15 trillion won.”
Samsung is said to be planning to debut its new flagship smartphone, the Galaxy S9, next month, presenting Apple’s iPhone X with a sooner-than-expected challenger. Samsung is also seeking to release a phone with a bendable display to help fend off challenges from Huawei Technologies Co., Oppo and other Chinese rivals.
The company’s cash cow has been the memory business. Contract prices for 32 gigabyte DRAM server modules nearly doubled last year while prices for 64 gigabit MLC NAND flash memory chips rose 55 percent in the same period, according to inSpectrum Tech Inc.
Samsung underwent a leadership change on the heels of its record earnings in the third quarter, with CEO Kwon Oh-hyun resigning to pave the way for Kim Ki-nam, a seasoned semiconductor engineer. The company’s de facto chief, Jay Y. Lee, has been fighting allegations of corruption in court, appealing a five-year sentence given in August when he was convicted of bribing a presidential confidante to get greater control of the company.
The 49-year businessman denies the charges and is awaiting a ruling on his appeal by an appellate court on Feb. 5. Samsung Electronics, of which he is a vice chairman and board member, is the crown jewel of a conglomerate comprised of about 60 units selling selling life insurance, cargo ships and clothes.
Crude Oil Rises Above $43 Per Barrel on Improved Demand
Crude Oil Rose Above $43 Per Barrel on Improved Demand
Global oil prices surged on Wednesday as global demand for the commodity improved.
The Brent crude oil, against which Nigerian crude oil is priced, increased from $42.68 per barrel it traded on Tuesday to $43.48 per barrel on Wednesday during the New York trading session.
The surge in prices was after OPEC and allies, known as OPEC plus, announced on Wednesday that they would restore part of capped crude oil production back to the oil market next month.
“As we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of production cuts will be consumed as demand continues on its recovery path,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the start of an OPEC+ video conference on Wednesday. “Economies around the world are opening up, although this is a cautious and gradual process. The recovery signs are unmistakable.”
OPEC plus had capped production by 9.7 million barrels per day in April and later reduced it to 7.7 percent earlier this month as more economies reopened for operations.
However, while the number of new COVID-19 cases continues to surge in the United States, the world’s largest economy, OPEC plus said demand for its commodity has risen in recent weeks, hence, the need to increase oil production.
South Africa’s Inflation Dips to 15 Year Low of 2.1% in May
South Africa’s Inflation Rate Declines to 15 Year Low in May
South Africa, Africa’s second-largest economy, said its inflation rate moderated to a record 15-year low in the month of May.
According to South Africa’s national statistics agency, Consumer Price Index, which measures inflation rate, moderated to 2.1 percent year-on-year, below the 3 percent to 6 percent range targeted by the central bank.
This, experts attributed to drop in fuel cost and the slow down in general spending due to COVID-19 lockdown.
Busisiwe Radebe, an economist with Nedbank, said “This number won’t be a surprise to the Monetary Policy Committee (MPC). Inflation will have to surprise in a major way to what they have in their forecasts. What they will be concerned about most is growth.”
In May, the nation’s central bank had lowered the interest rate to a record low of 3.75 percent to stimulate the recession and lockdown ravaged economy. The bank did strike a cautious tone, warning monetary policy alone could not spur economic growth.
“At the May meeting, the feeling was the bank had reached the trough in rate cuts. So they’ll probably hold rates,” Radebe said. He added that a shift in the central bank’s 7 percent GDP contraction would be key indicator.
Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies
Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies
Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.
According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.
The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.
It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.
“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”
Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.
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