SK hynix's (000660.KS) sweeping shareholder return plan drove the KOSPI up more than 5%, lifting the benchmark back above the 6,800 level. Expectations that Samsung Electronics (005930.KS) could unveil shareholder returns of as much as 150 trillion won helped ease concerns about the durability of memory chip earnings. The KOSPI, which had struggled to hold the 7,000 line after a sharp drop in July, is now expected to attempt a full-fledged rebound on the back of record-sized shareholder returns from the country's two chip giants.
The KOSPI closed at 6,852.58, up 381.41 points, or 5.89%, from the previous session, the Korea Exchange said on the 20th. The surge triggered the market's 24th buy-side sidecar of the year.
SK hynix's shareholder return announcement and its rapid share buyback led the market's rebound. On the first day of the buyback, SK hynix purchased 650,000 shares at an average price of 1.678182 million won during the session, spending a total of 1.0908 trillion won ($759 million). SK hynix closed 12.73% higher at 1.691 million won, while Samsung Electronics ended up 9.49% at 271,000 won, with the two chip leaders driving the index higher.
The day before, SK hynix said it would buy back and cancel its entire 40 trillion won ($27.8 billion) in treasury shares within the next three months and return more than 50% of its cumulative free cash flow (FCF) from 2025 to 2027. Analysts welcomed the move, saying it marked a turning point for resolving the stock's undervaluation, as the company acted faster than its earlier plan to make the announcement within the third quarter and raised its return threshold to "more than" 50% from the previous cap of "up to" 50%. Domestic and overseas brokerages estimate total returns through 2027 at between 150 trillion and 230 trillion won. In a report, JP Morgan said the 40 trillion won "is equivalent to 63% of trailing 12-month FCF and represents the most aggressive shareholder return among global memory peers such as Kioxia," adding that the stock "will gradually recover after passing its worst phase."
The market expects Samsung Electronics to unveil a shareholder return plan of around 150 trillion won before long. Unlike SK hynix, which centers on share buybacks and cancellations, Samsung Electronics is more likely to weight its plan toward dividends. As the large-cap chip stocks leading the market roll out sweeping shareholder return plans, expectations for a rebound in the domestic market are also growing. Concerns about the durability of memory earnings are easing, and foreign investors are expected to return as the "value-up" push accelerates. Indeed, global investment banks (IBs) had cited eased volatility and concrete shareholder returns as conditions for returning to the KOSPI following the domestic market's sharp drop in July.
Foreign investors are showing signs of returning to the domestic market, riding an exchange rate that recently fell below 1,400 won. Foreign investors net bought 1.7116 trillion won on the KOSPI on the day. They were buyers on six of the seven trading days from the 11th through the day, excluding the 19th, with net purchases over the period reaching 6.391 trillion won. Lee Kyoung-min, an analyst at Daishin Securities, said semiconductor stocks that had been weak "were revived by SK hynix's strengthened shareholder returns and expectations of large-scale shareholder returns from Samsung Electronics," adding that "reduced supply pressure on long-term bonds from the U.S. Treasury's expanded bond buyback also eased external uncertainties."
