SK hynix’s “backstop” buyback ends ... nervous retail investors

As trading value on South Korea’s stock market fell to less than half its June level, SK hynix also completed its 40-trillion-won share buyback. Concerns are growing that the supply-demand gap could widen now that buying demand—which had absorbed selling not only from foreign investors but also from retail and institutional investors—has been exhausted.
■ SK hynix ends share buyback
According to the Korea Exchange, the main board’s average daily trading value from the 1st to the 20th of this month was 21.5447 trillion won. That was down 57.2% from 50.3471 trillion won in June. After falling to 36.8754 trillion won in July, 25.8460 trillion won in August and 21.3605 trillion won in September, it has remained in the low 20-trillion-won range this month.
The share buyback that had been absorbing selling amid sluggish trading has also ended. SK hynix completed the 40-trillion-won buyback it began on August 20 that day. The original deadline for the acquisition was the 19th of next month, but the company finished the buyback in about two months.
The buyback had served as a backstop, effectively absorbing almost all the shares sold by foreign investors, retail investors and institutions. From August 20 through the 20th of this month, foreign investors net sold 27.6805 trillion won worth of SK hynix shares, while retail and institutional investors net sold 8.3072 trillion won and 3.1302 trillion won, respectively. Their combined net sales totaled 39.1180 trillion won. Other corporations, by contrast, were net buyers of 39.1714 trillion won, an amount equivalent to all those sales. Since the actual buyback totaled 39.4269 trillion won, the company’s direct purchases had effectively supported supply and demand.
■ Month-end shareholder returns in focus
With Samsung Electronics and now SK hynix having completed their buybacks, the burden of absorbing sales of large-cap semiconductor stocks has shifted to other investors.
Samsung Electronics completed its share buyback on the 6th, after which retail investors took up the buying. Analysts say SK hynix will also need new buying demand to come in or selling pressure to ease in order to maintain supply-demand balance.
One concern is that investors who might be expected to make additional purchases are already facing losses. An official at an asset management firm said, “There needs to be an investor willing to buy after share prices have fallen and hold for the long term, but major investors such as pension funds and individuals are already sitting on losses. For share prices to rise, the selling overhang at higher price levels needs to be cleared.”
An additional share buyback, however, could ease the gap if approved. SK hynix plans to announce further shareholder-return measures when it releases its third-quarter results on the 28th. The market is focused not only on the scale of the returns but also on how much will be allocated to share buybacks and when they will actually be carried out. Dividends are also a form of shareholder return, but their impact on supply and demand differs from that of buybacks, through which the company directly purchases shares offered on the market.
Kim Rok-ho, an analyst at Hana Securities, forecast, “Based on free cash flow, I expect at least 30 trillion won in additional funds for shareholder returns. Share buybacks and cancellations of treasury shares are likely to be prioritized over dividends.”
[email protected] Bae Han-geul Reporter