SK hynix's (000660.KS) massive share buyback, worth up to 40 trillion won ($28.8 billion), is reshaping supply and demand in South Korea's stock market. A category of investors known as "other corporations" — normally a minor market force — has emerged as a key buyer, producing the unusual sight of the index rising even as retail investors, foreigners and institutions sell a combined total of more than 1 trillion won.
SK hynix bought back 650,000 of its own shares on the market on the 20th and again on the 21st, spending 1.0908 trillion won and 1.1335 trillion won respectively, according to the Korea Exchange (KRX) on the 23rd. That amounts to 2.2243 trillion won purchased over the two days since the buyback began. The company disclosed that it would buy an additional 650,000 shares on the 24th, and mechanical buying of around 1 trillion won a day is expected to flow in daily until the pledged 40 trillion won is exhausted.
As a result, net buying by other corporations — which had averaged 96.2 billion won a day through the 19th this year, or 0.34% of daily KOSPI turnover — surged 11-fold to 3.77% over the two days. That is enough to fill the gap left by foreign investors, who have kept selling throughout the year. Over the 156 trading days through the 21st this year, foreigners net sold an average of 1.0266 trillion won a day on the KOSPI. Retail investors (687.7 billion won) and institutions (225.1 billion won) had continued to cushion that foreign selling. Among institutions, most categories other than financial investment firms (391.6 billion won), whose flows are mostly exchange-traded fund (ETF) money, kept up net selling, including pension funds (-52.5 billion won). SK hynix's buyback alone is enough to offset this year's average daily foreign selling.
The market also saw an unusual pattern in which the index rose even as the "big three" — retail investors, foreigners and institutions — sold heavily. On the 21st, the KOSPI closed up 0.88%. Institutions net bought 248.1 billion won, but retail investors net sold 1.1652 trillion won and foreigners 171.1 billion won, for a combined 1.0882 trillion won in sales by the big three. Under normal conditions the index should have fallen, but other corporations, led by SK hynix, net bought 1.0931 trillion won and defended the index.
A securities industry official said Samsung Electronics (005930.KS) has announced a share buyback worth about 15 trillion won to fund employee bonuses, and that SK hynix will also need to buy back additional shares of a similar scale for bonuses. "Share buybacks by the two semiconductor giants that lead the market are expected to further strengthen the KOSPI's resistance to declines," the official said.
