The fallout from Samsung’s exploding Galaxy Note 7 smartphones could go well beyond Samsung. The fiasco of the Korean company’s recall, replacement, and then recall again of the fire-prone phones could affect the entire country’s stock market.
Analysts at JPMorgan Chase, the largest bank in the US, downgraded their position on Korean equities to underweight because of the Galaxy Note troubles, Jan Loeys, the firm’s chief market strategist, noted last week. Samsung makes up 18% of KOSPI, the Korean stock market, and so its relative size can influence investors’ perceptions of the whole market.
Meanwhile, JPMorgan has upgraded its outlook for Taiwanese stocks—on the assumption that Apple will benefit from the demise of this challenger smartphone. (Many of the companies in Apple’s supply chain are based in Taiwan.)
You can see the fortunes of the two countries’ stock markets diverging in the past month, in time with the changing prospects of Samsung and Apple. Samsung’s share price has dropped about 3% since Oct. 11, when the company said it was halting all sales of the phone, which many airlines have banned passengers from carrying. A recent regulatory filing suggests the disaster could cost Samsung $2.3 billion in lost profits. We will know more when the company reports third-quarter earnings later this week.
For Apple, orders for new iPhones exceeded analysts’ expectations in September and pushed up the share price of the US tech company. The Taiwanese stock market could get another boost tomorrow (Oct. 25) when Apple reports its latest quarterly earnings.