▲ AI PRISM* Personalized Economic Briefing
* Editor's note: "AI PRISM" (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.
[Key Issue Briefing]
■ Shareholder returns diverge: With the mandatory cancellation of treasury shares and separate taxation of dividend income for high-dividend companies now in effect, shareholder returns have emerged as a central theme in Korea's stock market. In Japan, however, which strengthened returns earlier, long-term share performance split sharply depending on whether earnings grew rather than on the size of payouts. In Korea as well, return policies at companies with deteriorating business conditions have failed to translate into a re-rating.
■ Global tightening restarts: With inflation from the Middle East and a weak yen overlapping, expectations for a Bank of Japan rate hike in September spread rapidly within a single month. The European Central Bank is also preparing an additional increase, and views favoring a discount rate hike have emerged at regional Federal Reserve banks in the United States, as the tightening clock for major economies' monetary policy accelerates again.
■ Chinese capital on the offensive: Chinese institutional investors have accounted for most of the demand in book-building for foreign-currency bonds issued by Korean companies, filling a supply gap during the off-season for issuance. At the same time, Chinese chipmaker YMTC is targeting the top spot in the global NAND flash market next year on the back of initial public offering proceeds, as China's presence grows in both capital and capacity.
[News of Interest to Global Investors]
1. Share Prices Stall Despite Payouts: The "High-Dividend Trap" Japan Revealed
- Key points: Shareholder returns have emerged as a central theme in Korea's stock market, but analysis suggests the scale of returns alone does not guarantee a re-rating of share prices. According to the Korea Exchange, cash dividends declared by Korean listed companies in the first half of this year totaled 43.2 trillion won, about 85% of last year's full-year figure of 50.9 trillion won, while treasury share cancellations last year reached 21.4 trillion won, exceeding acquisitions of 20.1 trillion won for the first time. NTT, Japan's largest telecommunications company, has raised its dividend for 16 consecutive years, yet its share price gain of about 7.5% this year fell far short of the Topix's 20.6% rise. By contrast, Japan's megabanks, where earnings recovery and shareholder returns came together, saw the Topix banking index climb to roughly five times its level since the start of 2022. Meanwhile, an analysis by SK Securities (001510) scored telecommunications services at 76 points for capacity to return capital but only 31 points for earnings momentum. Semiconductors had a dividend payout ratio of just 15.5% but scored 100 points on earnings momentum, ranking first among all sectors. Earnings strength, the assessment holds, is the key to differentiation in share prices.
2. Under Growing Price Pressure, Japan and Europe See Spreading Talk of September Hikes
- Key points: The case for a Bank of Japan rate hike in September is rapidly gaining strength. In a Reuters survey of economists conducted from the 17th to the 24th of this month, 57% of respondents expected a September increase — a sharp shift within a month from last month's survey, in which only 5% forecast a hike in the third quarter. The Bank of Japan raised its policy rate in June to 1%, the highest in 31 years. Inflation concerns stemming from the war in Iran remain, however, and selling pressure on the yen continues because of the interest rate gap with the United States. Some experts projected rates would rise to 1.5% by year-end. Meanwhile, ECB policymakers are preparing a 0.25 percentage point increase in September, and in the United States, the boards of four regional Federal Reserve banks — Dallas, Cleveland, Minneapolis and Kansas City — submitted views in July favoring a 0.25 percentage point rise in the discount rate.
- Key points: Young Poong and MBK Partners have petitioned to bar Korea Zinc Chairman Choi Yun-birm's side from exercising voting rights ahead of an extraordinary shareholders meeting. Korea Investment Holdings, a special purpose company on the Young Poong and MBK side, filed for an injunction with the Seoul Central District Court on the 21st of this month, arguing that voting rights on 1,045,545 shares — a stake of about 5% — held by Chairman Choi and 14 people including relatives should be restricted at the extraordinary meeting on the 9th of next month. At issue is that when the special purpose company P23 Partners borrowed 541.1 billion won in April of this year to acquire the stake held by white knight Bain Capital, the actual lending syndicate and pledgees — JB Woori Capital, The Kwangju Bank, The Jeonbuk Bank, Meritz Capital and Meritz Fire & Marine Insurance — were omitted from the initial disclosure. The Capital Markets Act provides that voting rights on the shares in question be restricted where there is false reporting or omission of material matters, so the balance of votes on key agenda items could shift if the petition is granted.
[Reference News for Global Investors]
- Key points: Hyundai Motor has unveiled an aggressive growth roadmap to confront deteriorating profitability head-on. José Muñoz, president of Hyundai Motor, said at the "2026 CEO Investor Day" held on the 26th at the Conrad Hotel in Seoul's Yeouido district that the company will introduce more than 100 new models over the five years through 2030, with more than 18 of them all-new vehicles in new segments. Hyundai Motor's global sales in the first half came to 1,966,267 units, down 4.9% from a year earlier, and revenue reached a record 95.1542 trillion won, but the operating margin retreated to 5.6% from 7.8% a year earlier. The company also plans to expand global production capacity, currently about 5 million units, by 1.27 million units by 2030, and raised its 2030 operating margin target to more than 9% from the previous 8% to 9%. It is simultaneously pursuing a shift to physical AI, including mass production in 2028 of software-defined vehicles developed with Nvidia and Ioniq 5 robotaxis for supply to Waymo.
5. Despite Global Rate Jitters, China Creates a Booming Market for Korean Paper
- Key points: Even with rates in major economies at their highest levels, issuance of Korean paper — foreign-currency-denominated bonds sold overseas — is pouring out. The Export-Import Bank of Korea raised 625 million New Zealand dollars (about 515.6 billion won) the previous day, returning to the New Zealand market for the first time in nine years since 2017, and the Korea SMEs and Startups Agency recorded the lowest spread among foreign-currency bonds of the same maturity issued at fixed rates by Korean public corporations in a $400 million deal on the 19th of this month. Funding conditions can hardly be called favorable — the 30-year Treasury yield remained in the high 5.2% range on the 26th even after the U.S. Treasury moved to buy back long-dated paper — but Kim Sang-in, a researcher at Shinhan Securities, explained that rising domestic bond yields have narrowed the funding cost gap between won-denominated and foreign-currency bonds. Chinese institutions, meanwhile, have accounted for 70% to 80% of orders in book-building for Korean corporate foreign-currency bonds and again deployed funds aggressively this month, serving as a mainstay of the issuance market.
6. China's YMTC Challenges Samsung and SK: "No. 1 in NAND Next Year"
- Key points: China's Yangtze Memory Technologies (YMTC) has set a goal of becoming the world's largest NAND flash producer by the end of next year. The Financial Times reported on the 25th that YMTC disclosed the plan to investors while preparing for an initial public offering, and according to TrendForce, YMTC ranked third in the global NAND market in the first quarter of this year behind Samsung Electronics (005930) and SK hynix (000660). YMTC filed an IPO application worth 33 billion yuan (about 6.9 trillion won) with the Shanghai Stock Exchange last week and posted first-quarter revenue of 47 billion yuan and net profit of 33 billion yuan, growth exceeding twice its full-year results from last year. Concerns have been raised, however, that aggressive capacity expansion by Chinese producers could lead to oversupply and drag down memory prices. Joanna Yang, a manager at asset manager Ninety One, noted that memory is a product traded worldwide with prices set in the global market.
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