The superlatives for South Korea’s most famous company have been so numerous that locals sometimes tire of hearing them. The country’s biggest stock, biggest exporter, biggest firm by sales and biggest private-sector employer.
So if you’re an equity investor with an idea to trade on South Korea, Samsung Electronics Co. is probably going to feature. But for four days next week, that’s not going to be an option. The stock of the world’s biggest smartphone maker is getting a reboot, and will be offline starting Monday through Thursday.
That’s how long Korea Exchange staff need to complete Samsung’s coming 50-to-1 stock split, including a national holiday Tuesday. While investors can still access Samsung’s global depository receipts in Europe, it means that they can’t trade Samsung’s regular shares until next Friday — a period in which they’ll be digesting the results of the historic summit between South and North Korea, along with key global economic data.
“The suspension is for a short time, though I’m not sure why even that length of period is required,” said Sat Duhra, a Singapore-based fund manager at Janus Henderson Investors. “In many developed markets the stock just trades at the new price the next trading day.”
Exchange officials say they need time to handle paperwork required by law, under the constraints of the market’s existing infrastructure. Korea Exchange said in a statement the bourse plans to improve its systems to become more like the U.S. and Japan, where little time is needed for stock splits.
So the stock that accounts for 21 percent of South Korea’s Kospi index will be unavailable for trading for almost a full week, during which gauges of manufacturing in key economies and a Federal Reserve policy decision will be released. Analysts, and overseas policy makers, will also be reacting to the April 27 pledge by the two Koreas to work on officially ending their war and denuclearizing the Korean peninsula.
See our blog on the historic Korean summit.
Other large-cap stocks in the Kospi might see more activity as a result of Samsung’s absence, said Gilbert Choi, a derivatives analyst at NH Investment & Securities in Seoul.
Samsung, asked about the suspension, referred to the Korea Exchange statement. The Suwon-based company, which Thursday announced better-than-expected quarterly earnings, was against a stock split until recently. After last year saying such a move would do little to enhance shareholder value, the firm approved the idea in January, saying it would allow more people to enjoy dividends and boost long-term value.
Indeed, there could be an inflow from retail investors after split, said Ha In-hwan, an analyst at SK Securities. As of Friday’s close, the shares were about 2.65 million won ($2,461) each. But the history of equity splits suggests any bump should be “short-lived,” he said.