Samsung Electronics and SK hynix's Expected 300 Trillion Won in Shareholder Returns Could Also Move the Exchange Rate

[Financial News] As Samsung Electronics and SK hynix opened their coffers, the foreign exchange market moved first. That is because the market is already pricing in the idea that the companies will eventually have to sell their dollar holdings to raise the won needed for massive shareholder returns.
In a report released on the 21st, Sangsangin Investment & Securities cited two main factors behind the won's recent strength: the conversion of funds raised through SK hynix's American Depositary Receipt (ADR) issuance and expectations of additional conversion tied to shareholder returns from Samsung Electronics and SK hynix. On the 19th, the won–dollar exchange rate fell to the 1,300-won range.
Since July, the main driver of the won's strength has been the roughly 40 trillion won, or $26.5 billion, raised through SK hynix's ADR issuance. Researcher Choi Ye-chan at Sangsangin Investment & Securities said, "SK hynix is estimated to have converted the ADR proceeds in batches of about $100 million a day over 20 to 30 trading days to reduce market disruption," adding, "The conversion process is now effectively nearing completion."
He analyzed in the report that the exchange rate fell by about 57 won between July 3 and 14, when expectations of ADR conversion were reflected, and by another 74 won between July 15 and August 11, when actual conversion was believed to be underway. The cumulative decline came to about 129 won.
What stands out is that the won has continued to strengthen even after the ADR-related effect faded. Choi pointed to the shareholder returns themselves from Samsung Electronics and SK hynix as the next driver.
On the 19th, SK hynix decided to buy back 4 trillion won worth of treasury shares on the open market and cancel them in full. It also said it would return more than 50% of cumulative free cash flow (FCF) from 2025 to 2027 to shareholders. Choi then added Samsung Electronics' 20 trillion won plan and analyzed a scenario in which total shareholder returns could reach as much as 300 trillion won, or about $211 billion. That is seven to eight times SK hynix's ADR proceeds.
Of course, 300 trillion won will not translate directly into dollar selling. Companies may use their won holdings and domestic operating cash flow, while foreign shareholders who receive dividends or proceeds from treasury share sales may convert those dollars back and send them overseas. Choi estimated that out of about 297 trillion won in cash-like shareholder returns, the reverse remittance component would be around 134 trillion won. Whether the conversion amount exceeds that benchmark will be the turning point for the won's strength, and the breakeven conversion ratio is about 45%.
The base scenario assumes that 50% to 60% of the shareholder return funds are converted in stages over six to 12 months. In that case, net dollar supply would range from 15 trillion won to 45 trillion won, and the exchange rate impact would be estimated at about 18 to 77 won. Based on this, the projected exchange rate range over the next 12 months is 1,325 to 1,400 won.
Choi said, "Because demand for the won appears first through expectations of conversion and actual conversion, downward pressure on the exchange rate is likely to dominate in the short term." He added, "Later on, however, as dividend reverse remittances and the reverse conversion of treasury share sale proceeds accumulate, the pressure for a rebound could grow."

[email protected] Kim Hyun-jung Reporter