[Edaily Reporter Kim Kyung-eun ] Share buybacks by SamsungElectronics(005930)and SK hynix(000660)have once again emerged as a factor influencing the stock market’s rebound. This follows the two companies absorbing foreign selling pressure by purchasing 55 trillion won worth of their own shares over the past two months, and SK hynix’s announcement of an additional 20 trillion won in buybacks. Analysts in the securities industry note that while share buybacks are effective in defending against falling stock prices, they have limited ability to trigger a sustained upward trend. The consensus is that a full-fledged rebound will only be possible once uncertainty surrounding the semiconductor industry subsides and foreign investor sentiment improves.

Han Ji-young, an analyst at KIWOOM Securities, stated in a report on the 2nd, “The sharp decline in the KOSPI in October was largely driven by increased foreign selling amid concerns over the sustainability of semiconductor profits, compounded by a reduction in share buybacks that had previously absorbed that selling pressure.”

According to KIWOOM Securities, from August 24—when SamsungElectronics and SK hynix simultaneously began buying back their own shares—through October 6, foreign investors net sold a total of 26.6 trillion won worth of these two stocks. During the same period, the two companies’ share buybacks totaled 46.5 trillion won, 1.7 times the amount of net foreign selling. The KOSPI rose 0.4% during this period, effectively trading sideways.

As the scale of share buybacks decreased, the stock market trend also shifted. Following SamsungElectronics’ completion of its buyback on the 6th of last month, SK hynix also reduced its daily purchase order from 600,000 shares to 400,000 shares. Consequently, the two companies’ average daily share buyback amount fell from 1.6 trillion won to around 600 billion won.

In contrast, selling pressure from foreign investors actually intensified. From the 7th to the 15th of last month, foreign investors’ net selling of SamsungElectronics and SK hynix averaged 1.9 trillion won per day—more than double the amount during the period when both companies were buying back shares. Between the 7th and 21st of last month, when the scale of share buybacks fell to about 60% of foreign investors’ net selling, the KOSPI plunged 17.4%.

Analysts suggest that the share buybacks served to absorb foreign selling pressure and alleviate downward pressure on the stock market. In particular, given the large market capitalization weight of SamsungElectronics and SK hynix, it is believed that whether or not these two companies conducted share buybacks influenced the overall supply and demand dynamics of the KOSPI.

Market attention is also focused on the shareholder return policies recently announced by the two companies. SK hynix announced a new share buyback program worth approximately 20 trillion won on the 28th of last month and began purchasing shares the following day. The company plans to purchase up to 1,492,000 shares per day through January 28 of next year. Of this amount, approximately 10 trillion won will be used to enhance shareholder value through share cancellation, while the remaining 10 trillion won will be allocated for employee compensation.

SamsungElectronics has decided to maintain this year’s shareholder return program at 90 trillion to 110 trillion won, but the scale and timing of additional share buybacks will be determined at a board meeting in late January of next year. To date, the company has executed or finalized shareholder returns totaling 35 trillion won, and how the remaining 55 trillion to 75 trillion won is allocated is expected to influence future stock prices.

Market reactions to the news were mixed, depending on whether the buybacks actually took place. On the 29th of last month, SK hynix rose 2.6%, while SamsungElectronics fell 4.1%. Analysts attribute this difference in investor sentiment to the fact that while both companies reported earnings that exceeded market expectations, SK hynix immediately executed a share buyback, whereas SamsungElectronics postponed a decision on additional shareholder returns.

The problem is that it is difficult to sustain a rise in stock prices through share buybacks alone. On the 28th of last month, the KOSPI surged 6.6% on the back of SK hynix’s strong earnings and the announcement of long-term supply contracts. At that time, SK hynix’s new share buyback program had not yet begun. This suggests that the rebound was driven more by improved semiconductor profit outlooks and expectations for shareholder returns than by the supply-and-demand effects of actual purchases.

Conversely, on the 30th of last month, SK hynix—which was in the midst of a new share buyback—also saw its stock price drop sharply as concerns about the profitability of artificial intelligence (AI) investments resurfaced due to weak cash flow at U.S.-based Alphabet. This case demonstrates that it is difficult to prevent a stock price decline through share buybacks alone if foreign selling pressure intensifies or semiconductor profit outlooks deteriorate.

One analyst noted, “While share buybacks help alleviate downward pressure, a sustained rebound requires both improved semiconductor profit outlooks and an improvement in foreign investor demand.” He added, “Regarding this latest buyback announcement, we must consider not only the announced scale but also the actual execution pace, foreign investor demand, and semiconductor profit outlook,” emphasizing that “greater weight should be placed on whether concerns about the profitability of AI investments are easing and whether confidence in memory profit outlooks is being restored.”