KOSPI plunges more than 3% as Samsung, SK hynix shares tumble

The KOSPI fell more than 3 percent Monday as weakness in Samsung Electronics and SK hynix weighed on the broader market, reversing gains posted over the previous two sessions on expectations that the two semiconductor heavyweights would boost shareholder returns.

The benchmark index opened 31.88 points, or 0.46 percent, lower at 6,881.07 before extending its losses to close at 6,696.96, down 215.99 points, or 3.12 percent.

Foreign investors led the selling, offloading a net 3.69 trillion won ($2.67 billion) worth of KOSPI shares, while institutional investors sold 1.29 trillion won. Retail investors bucked the trend with net purchases of 3.32 trillion won, cushioning the market’s losses.

Samsung Electronics and SK hynix shares dropped 8.70 percent and 3.41 percent, respectively, with the disparity in their losses largely attributed to differences in the shareholder return measures announced last week.

Last Wednesday, SK hynix unveiled plans to repurchase 40 trillion won worth of its own shares and retire them in full, while pledging to return at least 50 percent of its free cash flow over the next three years.

Samsung Electronics, meanwhile, said after trading ended Friday that its board had approved a shareholder return plan for this year worth about 90 trillion to 110 trillion won. The company plans to pay about 30 trillion won in cash dividends, including its regular third-quarter dividend, but will finalize the details at a board meeting in late October.

The lack of immediate details disappointed investors who had been expecting stronger and more immediate measures.

Lee Young-gon, leader of Toss Securities’ Research Center, said SK hynix’s stronger focus on share buybacks and cancellations is likely to have a greater short-term impact on its stock than Samsung Electronics’ shareholder return measures. He attributed the difference largely to the companies’ respective corporate governance structures and regulatory environments.

“Repurchasing and canceling shares tends to have a more direct impact on share prices than paying cash dividends, even if the total amount returned to shareholders is the same,” he said. “For instance, SK hynix began buying back about 650,000 shares a day last Thursday. That represents about 12 percent to 15 percent of its typical daily trading volume, creating steady demand that provides structural support for the stock.”

Meanwhile, the secondary Kosdaq opened 2.33 points, or 0.29 percent, higher at 804.27 before extending its gains to close at 813.33, up 11.39 points, or 1.42 percent.

Kim Ki-baek, an analyst at Shinhan Securities, attributed the strength to a rotation of funds out of Samsung Electronics and into other sectors.

“Battery-related stocks, along with materials, parts and equipment companies, were seeing broad gains as the Kosdaq attracted the redirected investment,” he said.

In the Seoul foreign exchange market, the won strengthened, closing onshore trading at 1,382.4 per dollar, up 4.1 won from the previous session.