Samsung Slumps as Asian Markets Struggle to Hold Gains
Samsung Electronics plunged eight percent Tuesday after it called an unprecedented halt to sales of its troubled Galaxy Note 7 handset, while most regional markets struggled to maintain an early energy-fueled rally.
The world's biggest smartphone maker dragged Seoul's KOSPI down 1.2 percent after it told customers to stop using their Galaxy Note 7 devices and called a halt to worldwide sales, as US officials warned the phones could blow up.
The announcement came a little over a month after the world's largest smartphone maker announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.
The crisis has turned into a PR disaster for the company, which prides itself on innovation and quality, and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.
Samsung's share price plunge followed a 1.5 percent fall Monday on reports it was suspending production of the device, after major distributors stopped offering replacements for defective handsets because of continued safety concerns.
"If it's once, it could be taken as a mistake. But for Samsung, the same thing happened twice with the same model so there's going to be a considerable loss of consumer faith," said Greg Roh at HMC Investment Securities.
The issue weighed on tech shares in Asia with Lee Kyoung Min, a senior analyst for global investment strategy with Daishin Securities in Seoul, telling Bloomberg News that "uncertainty surrounding the information-technology industry (is) spreading”.
The KOSPI was among the big losers in the region, where the morning saw every market up as a rally in oil prices Monday propelled energy firms.
- Oil rally stalls -Oil dipped slightly after soaring around three percent Monday in response to comments from President Vladimir Putin that Moscow was ready to align with OPEC's push to limit production and address a supply glut.
His comments at the World Energy Congress in Istanbul came as Saudi Energy Minister Khalid al-Falih predicted prices could rise further, having been under pressure since mid-2014 on the supply glut, overproduction and weak demand.
Big-name energy-linked firms jumped in Wall Street and their counterparts in Asia initially followed suit before the rally lost steam.
At the end of the trading day Tokyo was one percent higher, while Sydney and Wellington each gained 0.1 percent.
Shanghai closed up 0.6 percent.
But Hong Kong reversed a morning rally to sit 1.5 percent lower in late trade, with developers also hit by measures in some Chinese cities aimed at cooling property prices.
The dollar skirted with a rate of 104 yen on lingering talk of a US interest rate rise, while the pound struggled to recover from 31-year lows against the greenback on worries over Britain's exit from the European Union.
The dollar was also sharply higher against most other high-yielding currencies, including the South Korean won, Australian dollar and Malaysia's ringgit.
Mexico's peso fell back slightly Tuesday, a day after hitting a one-month high against the dollar following the release of a video showing presidential hopeful Donald Trump talking crudely about women, and as his rival Hillary Clinton was deemed to have prevailed in their second debate.
The dollar fell to 18.8853 pesos Monday but edged up to 18.9236 on Tuesday. Republican candidate Trump has campaigned on building a wall between the US and Mexico and said he will tear up a free-trade deal with the country.
- Key figures at 0700 GMT -Tokyo - Nikkei 225: UP 1.0 percent at 17,024.76 (close)
Hong Kong - Hang Seng: DOWN 1.5 percent at 23,487.92
Shanghai - Composite: UP 0.6 percent at 3,065.25 (close)
Pound/dollar: DOWN at $1.2316 from $1.2362
Euro/pound: UP at 90.34 pence from 90.09 pence
Euro/dollar: DOWN at $1.1126 from $1.1137
Dollar/yen: UP at 103.92 yen from 103.62 yen
Oil - West Texas Intermediate: DOWN 28 cents at $51.07 per barrel
Oil - Brent North Sea: DOWN 31 cents at $52.83
New York - DOW: UP 0.5 percent at 18,329.04 (close)
London - FTSE 100: UP 0.8 percent at 7,097.50 points (close)
Source: Agence France Presse
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