Samsung, SK Hynix May Unveil $109 Billion Shareholder Return Plan This Month

Samsung and SK Hynix shareholder returns seen as catalyst for a market rebound

Analysts point to key triggers for a Kospi recovery

Chipmaking heavyweights may unveil their boldest move as early as late August

Foreign investors need a clearer Korea value-up story

AI profit growth must also counter bubble concerns

Samsung, SK Hynix May Unveil $109 Billion Shareholder Return Plan This Month

The Kospi, which fueled hopes of a V-shaped rebound with an unusually strong gain on the last day of July, is now moving sideways near the 6,000 level. Individual and foreign investors who had driven the rally have turned cautious. Concerns are also building that high interest rates and debate over a semiconductor peak could leave the market stuck in an L-shaped stall. Investors are looking to large-scale shareholder returns from Samsung Electronics and SK Hynix as a potential catalyst for a rebound.

The Korea Exchange said the Kospi closed at 6,258.77 on Aug. 7, the last trading day of the first week of August, extending its losing streak to seven straight weeks. It was the first time since December 2022 that the benchmark had fallen for nearly two months, when the Federal Reserve's fourth straight jumbo rate increase coincided with the Legoland credit-market shock. Unlike then, the market is now contending with the lack of rebound momentum despite favorable developments including record earnings from Samsung Electronics and SK Hynix and expanding investment in AI data centers by global big tech companies. The Kospi closed at 6,345.53 on Aug. 11.

Lower volatility following tighter rules on single-stock leveraged exchange-traded funds is a positive. But the market remains boxed in because its bellwether stocks have lost traction. Samsung Electronics closed at 239,500 won on Aug. 11. After swinging for more than a week, the stock ended almost exactly where it had closed on Aug. 3, the first trading day of the period. SK Hynix fell 9% over the same stretch, dropping from 1.567 million won to 1.425 million won.

Analysts have identified proof of artificial intelligence profitability as one of three main catalysts that could break the market out of its sideways trade. That would require higher forecasts for third- and fourth-quarter operating profit at the two chipmakers, along with improved free cash flow at big tech companies such as Microsoft, to undercut the AI bubble narrative. Data from EpicAI show consensus estimates for third-quarter operating profit at 11.36415 trillion won for Samsung Electronics and 7.88277 trillion won for SK Hynix. That would represent increases of 834.1% and 592.5%, respectively, from a year earlier.

Some market participants say third-quarter earnings would need to deliver a clear upside surprise to drive a rebound. Expectations for strong earnings in 2027 and 2028 have already been substantially priced into shares. In the second quarter, SK Hynix posted record quarterly operating profit of 6.05426 trillion won, but the stock still fell because the result was 6.4% below market expectations. Rising competition from Chinese chipmakers is also weighing on sentiment.

Shareholder return scale is the key

A second catalyst is stability in the yield on the U.S. 10-year Treasury note. Market participants say a move above 5% would pressure equities by raising funding costs for big tech companies and boosting demand for safer assets. As of Aug. 11, the yield stood at 4.69%. It had held in the 4.4% range until early July, then rose to 4.75% on July 31 on renewed prospects for a Federal Reserve rate increase, before easing slightly. Even so, it remains close to the psychologically important 5% threshold. Additional rate increases by the Bank of Korea are also a variable. Other steps, such as activating a stock market stabilization fund or temporarily banning short selling, have been discussed, though financial authorities remain cautious.

The market is focused on large-scale shareholder returns from Samsung Electronics and SK Hynix. With debate over the semiconductor cycle unresolved and the path of Treasury yields still uncertain, shareholder returns are one of the few levers the companies can pull directly. Such a move could also help sell foreign investors on Korea's value-up story and attract fresh capital. Japan's NAND flash maker Kioxia recently missed second-quarter market expectations, but its shares rose for four straight sessions after it announced an 800 billion yen share buyback and stock split.

The key question is size. Brokerages estimate the two companies' combined free cash flow this year at the high-200 trillion-won range to the low-300 trillion-won range. Because the two companies have recently said they plan to use 50% of free cash flow over the past three years for dividends and share buybacks, expectations are building that shareholder return programs could total at least 150 trillion won. KB Securities recently projected that Samsung Electronics' new shareholder return policy alone could range from at least 100 trillion won to as much as 200 trillion won a year. A detailed roadmap and the size of the plan could be announced as early as late August.

Lee Sun-a, Hankyung.com reporter, suna@hankyung.com