KOSPI Rises as Samsung and SK Boost Market with Treasury Share Cancellations; "100 Trillion Won Special Dividend Possible"

Samsung Electronics' 16 Trillion Won Treasury Share Cancellation Boosts Stock Price
Expectations Rise for Additional Value Enhancement Announcements, Including '100 Trillion Won Special Dividend'
SK Also to Cancel 5 Trillion Won in Treasury Shar

Samsung Electronics has decided to cancel its treasury shares worth 16 trillion won. SK Inc., the holding company of SK Group, has also announced plans to cancel treasury shares worth approximately 5 trillion won. As the third amendment to the Commercial Act, mandating the cancellation of treasury shares, comes into effect, the leading companies of the top two business groups are proactively moving to cancel treasury shares, raising expectations for a bullish trend in the stock market.

Samsung Electronics Shares Rise on Announcement of 16 Trillion Won Treasury Share Cancellation

On March 11, the KOSPI opened at 5,658.72, up 2.28% from the previous trading day, and further climbed to 5,679.68 as of 9:29 a.m., marking a 2.66% increase. The KOSDAQ also started the session at 1,155.48, up 1.56%, and as of 9:30 a.m., the increase widened to 1.68%.

Leading today's stock market rally are large-cap stocks such as Samsung Electronics and SK. As of 9:23 a.m., Samsung Electronics was trading at 138,000 won, up 2.6% from the previous session. At the same time, SK was trading at 370,500 won, up 5.56% from the previous session.

On the previous day, Samsung Electronics announced that it would cancel 87 million out of its 105.43 million treasury shares during the first half of the year. Based on the previous session's closing price, this amounts to approximately 16.35 trillion won, which is about one-third of last year's total operating profit—a massive cancellation. SK also held a board meeting on March 10 and decided to cancel about 14.69 million shares out of its 17.98 million treasury shares, excluding those earmarked for employee compensation. Based on the previous day's closing price, the value of these treasury shares is 5.1575 trillion won.

Kyungmin Lee, a researcher at Daishin Securities, interpreted this move as "a strong expression of intent by both Samsung Electronics and SK to enhance shareholder value through large-scale treasury share cancellations."

Following the news of Samsung Electronics' treasury share cancellation, shares of Samsung Life Insurance, which holds an 8.51% stake in Samsung Electronics, and Samsung Fire & Marine Insurance, with a 1.49% stake, also surged. As of 9:24 a.m., Samsung Life Insurance was trading at 223,000 won, up 5.44%, and Samsung Fire & Marine Insurance was at 500,000 won, up 2.35%.

If Samsung Electronics cancels its treasury shares as planned, the combined stake of Samsung Life Insurance and Samsung Fire & Marine Insurance in Samsung Electronics will exceed 10%. In this case, it could violate the separation of industrial and financial capital principle, requiring both companies to sell some of their Samsung Electronics shares. This expectation of profit realization is reflected in their stock prices. Ji-won Kim, a researcher at Daol Investment & Securities, evaluated, "The possibility of shareholder return benefits from Samsung Electronics will continue to limit downward pressure on the share prices of Samsung Life Insurance and Samsung Fire & Marine Insurance."

With the third amendment to the Commercial Act fully implemented on March 6 under the Lee Jaemyung administration, a wave of treasury share cancellations by companies is expected to continue. The key point of the amendment is that newly acquired treasury shares must be cancelled within one year from the acquisition date, and previously held treasury shares must be cancelled within one and a half years. There is growing anticipation in the securities market that more companies holding treasury shares will follow Samsung and SK with cancellation announcements.

Growing Expectations for Special Dividends and Value Enhancement at Samsung Electronics

In the case of Samsung Electronics, booming memory semiconductor sales are expected to lead to a sharp increase in profits this year, fueling anticipation of a large-scale special dividend. Global investment bank Macquarie stated in a report released on February 24 that Samsung Electronics could pay a massive special dividend this year, based on a net profit of up to 200 trillion won. Daniel Kim, a Macquarie researcher, mentioned, "Samsung Electronics may pay a special dividend of around 100 trillion won to shareholders at the end of the year."

There are also expectations that Samsung Electronics will announce a value enhancement plan (value-up) within this month. Although Samsung Electronics is the largest company in Korea, it has not yet issued a value-up disclosure. With the government introducing a separate taxation system for dividend income, there is speculation that Samsung Electronics could make a value-up announcement around the regular general shareholders meeting scheduled for March 18.

As expectations for shareholder returns rise, foreign investors who had been net sellers of Samsung Electronics shares may return as net buyers. Foreign selling of Samsung Electronics shares accelerated from mid-February. From February 13 to March 9, foreign investors were net sellers of Samsung Electronics every single trading day, with total net sales amounting to 20.0129 trillion won during this period. As a result, the foreign ownership ratio in Samsung Electronics fell below 49.97% as of March 5, the first time in about 11 months since the market was shaken by concerns over Trump administration tariffs in April last year.

The sell-off intensified following the outbreak of the Middle East war. On February 27 and March 3, foreign investors net sold Samsung Electronics shares worth 4.2242 trillion won and 3.1967 trillion won, respectively. During the same period, SK hynix shares worth 2.5029 trillion won and 1.207 trillion won were also sold. This was due to escalating stagflation fears in the market after news of a U.S. airstrike on Iran was reported on February 28.

The securities industry viewed this as a result of profit-taking and portfolio rebalancing in exchange-traded funds (ETFs). Recent heavy foreign selling of Korean semiconductor stocks is seen as a mechanical phenomenon caused not by the fundamentals of the companies themselves, but by the index weighting rules of the U.S.-listed iShares MSCI Korea ETF (EWY). Under the index calculation method, if the weight of a single stock such as Samsung Electronics approaches 25%, or if the combined weight of Samsung Electronics and SK hynix nears 50%, structural selling pressure arises as holdings must be reduced to comply with regulations.

Once the weights are restored to a stable range, there is a high possibility that foreign inflows will return. In fact, according to the Korea Exchange, on March 10, foreign investors were net buyers of Samsung Electronics shares worth 775.9 billion won and SK hynix shares worth 706 billion won.

Economic commentator Jiho Yoon explained, "Foreign investors sold Samsung Electronics shares as a means of profit-taking. It cannot be said that they reduced their holdings due to any particular reason." He added, "Since this is a period of market volatility, it should be viewed in the context of overall trends. The expected size of Samsung Electronics' shareholder returns is quite large, making the stock very attractive from that perspective."

This content was produced with the assistance of AI translation services.