South Korean stocks are about to lose a key source of support earlier than expected, just as the market struggles to push decisively higher.
Samsung Electronics Co. and SK Hynix Inc. said in late August they would buy back a combined 55 trillion won of their own shares, with the plan expected to end around the second half of November. The chipmakers have already completed about 80% of the planned buybacks, according to Bloomberg calculations based on exchange data. At the current pace, the buying could be over by mid-October — about a month earlier than planned.
The accelerated purchases have provided an important source of demand for the benchmark Kospi index at a time when trading volume has dried up and few other large buyers have stepped in. Their earlier-than-expected end risks leaving the gauge more dependent on a revival in foreign and institutional flows to break sustainably above the 7,000 level that has held since late July.
“As the pace of the buyback was faster than expected, I think it will be exhausted by mid- or end-October,” said Cho Junkee, an analyst at SK Securities. “When the buyback is gone, it could be a factor that somewhat elevates volatility.”
The buybacks are part of the largest shareholder return program in South Korea’s history, unveiled amid investor pressure to share more of the cash generated by the AI boom. In September, even as foreign investors sold about $14 billion of Kospi stocks, and retail investors sold $11 billion, the index is still set to end the month almost flat, buoyed by the chipmakers’ purchases.
Still, the support hasn’t been enough to keep the Kospi above 7,000 despite repeated attempts. The index has lost almost 20% this quarter, the worst performance among major equity benchmarks and a stunning reversal after leading the world in the first half of the year. It was at 6,870.81 on Tuesday.
“Kospi appears to be facing an upper bound around 7,500,” Cho said. “Because trading volume has become thin, it’s a source of concern unless there are fresh buyers.”
With assistance from Abhishek Vishnoi.
This article was generated from an automated news agency feed without modifications to text.
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