An electronic trading board at Woori Bank headquarters in central Seoul shows the benchmark KOSPI closing at 5,224.36 points, Friday, up 3.11 points, or 0.06 percent, from the previous session. Yonhap
Top conglomerates in Korea are rushing to buy back large quantities of their own shares, a measure that has been gaining ground and has taken on even greater significance amid a bullish stock market, industry officials said Sunday.
Financial authorities have been encouraging the buybacks, which reduce the number of shares circulating in the market, increasing earnings per share and boosting investor confidence.
Previously, the buybacks were aimed primarily at supporting domestic stocks that had been undervalued compared to global peers.
Conglomerates are now pursuing buybacks more aggressively to sustain momentum for the KOSPI, which has risen at the fastest pace among global indexes this year and surpassed the historic 5,000-point mark, as well as the secondary Kosdaq bourse, which breached 1,000 points for the first time in four years.
The companies involved include Samsung Electronics, SK hynix and Hyundai Motor, all KOSPI-listed, flagship affiliates of their corresponding conglomerates.
As for Samsung Electronics, it announced a plan to buy back more than 6 trillion won ($4.13 billion) worth of shares to support its stock price, which rose 33.8 percent in January to 160,500 won.
All of the shares are intended for employee compensation and are subject to a one-year lock-up, requiring the employees to hold them for a year. These stockholders will receive a 15 percent bonus in shares.
“The plan is expected to serve a goal of performance-based compensation as well as internal cohesion,” an industry official said.
SK hynix announced it would purchase 12.24 trillion won worth of its own shares by the end of this month, following a 39.6 percent surge in its share price to 677,000 won in January.
Hyundai Motor plans to reclaim 400 billion won in shares by the end of April and retire them by the end of the year, in the wake of a 69.6 percent increase in its share price to 500,000 won last month.
The move is also part of a broader plan under which the company aims to acquire up to 4 trillion won in shares over the next three years.
“This wave of buybacks differs from previous years, carrying the higher purpose of contributing to the record-breaking market boom,” said Jung Eui-jung, head of the Korean Stockholders’ Alliance.
He speculated that the buybacks would continue as a string of shareholders’ meetings is scheduled for March. “Listed companies need to show their commitment to shareholder returns,” he said.
Furthermore, Jung explained, “Companies have little choice but to actively pursue shareholder returns,” as the ruling Democratic Party of Korea is sensitive to market trends ahead of the June local elections and has pledged legislation to mandate share buyback cancellations.
