SK hynix(000660) began its second round of share buybacks, bringing corporate buying, which had vanished for a while, back into the KOSPI market. Foreign investors also continued net buying for a third straight session, but the KOSPI index closed down more than 1% on the 29th as Samsung Electronics fell more than 4% on disappointment over shareholder returns.
Analysts in the securities industry said that while share buybacks can help prevent the index from falling, they have limited power to lift it.
Other corporations, which are estimated to include SK hynix's share buyback volume for the day, posted net purchases of 338.3 billion won. Compared with the daily average net buying by other corporations of about 50 billion won during Oct. 22–28 after SK hynix's first share buyback ended, the amount is nearly seven times larger.
The daily average net purchases by other corporations fell to about 1.645 trillion won on Sept. 28–30 and about 745 billion won on the 1st–21st of this month, then recently dropped to around 50 billion won.
SK hynix the previous day outlined this year's shareholder returns at about 100 trillion won and said it would spend more than 60 trillion won on share purchases and cancellations. Of that, it said it would buy back about 20 trillion won worth of shares from the day through Jan. 28 next year. About 10 trillion won will be used to enhance shareholder value, including cancellations, and the remaining roughly 10 trillion won will be used for employee compensation. The record date for dividends is Nov. 30.
By contrast, Samsung Electronics did not disclose the additional share buyback and cancellation plans the market had expected during its confirmed third-quarter results conference call the same day. With the announcement of a new shareholder return policy delayed, Samsung Electronics saw selling on disappointment and closed at 232,000 won, down 4.13% from the previous session. SK hynix finished up 2.62% at 1,526,000 won.
Lee Jin-woo, head of investment strategy at Meritz Securities, said, "There is no market doubt about the core businesses of SK hynix and Samsung Electronics," and noted, "Short-term moves are diverging because of differing expectations for shareholder returns rather than the core business." Lee said, "Unlike last quarter, SK hynix was more aggressive this time, while expectations for Samsung Electronics were diluted as the announcement of a new shareholder return policy was delayed more than expected."
Experts did not attach great significance to the mere resumption of share buybacks. Lee said, "Share buybacks are meaningful in that they can serve to protect the downside in a highly volatile phase," but added, "Whether they can lift share prices depends more on industry sentiment and big tech guidance." He continued, "If expectations build that shareholder returns will continue steadily, valuations rise, but if they are seen as a one-off, it is hard to expect more than a cushioning effect."
Lee Sang-heon, an analyst at iM Securities, also said, "Share buybacks do not move the KOSPI index," noting, "There has always been foreign selling when buybacks were conducted." Lee assessed that easing foreign selling has a greater impact on the index than buybacks.
In fact, foreign selling is easing. Foreign investors posted net purchases of 75.8 billion won on the day, extending a buying advantage for three straight sessions after 561 billion won on the 27th and 769 billion won on the 28th.
Lee said, "The sharp selling in semiconductors is coming to an end," but added, "It remains to be seen, with several variables, whether aggressive buying will flow in." Lee picked Amazon's earnings, to be released tonight, as a decisive variable to gauge investor appetite for big tech.
Experts said the stock market's direction in November depends on external variables and next year's earnings outlook. Lee Sang-heon said, "If the U.S. midterm elections end and uncertainties related to Iran are resolved, oil prices and interest rates will stabilize, which will be positive for foreign investors," adding, "The KOSPI can build a floor and rise."
Lee said, "Once the release of this year's third-quarter results ends, the market will begin to price in next year's earnings outlook," adding, "If the outlook is optimistic, the rebound will continue; otherwise, a volatile market is likely to be prolonged."
