Samsung Electronics' anticipated equity buyback is raising investor expectations that the Korean giant will buy up non-voting preferred shares, narrowing a steep discount and setting an example for others. According to Business Standard, more than 100 South Korean companies, including Hyundai Motor Co. and LG Chem Ltd., have issued preferred shares, raising capital without diluting founding families' voting power. They pay a small dividend premium over common stock, but trade at an average of a 45% discount, according to Sachin Mistry, a portfolio manager at Palliser Capital in London. Market watchers expect Samsung to target its discounted preferred stock in any buyback, as it would save money and help sidestep a rule that could force its affiliates to sell down its holdings. The 26% gap between preferred stock and common equity is at its widest in more than a decade, even after narrowing from 37% in recent months due to buyback expectations.
The South Korean won surged 1.3% intraday to 1,334.70 per U.S. dollar, marking its strongest level since October 2024 and reaching a two-year high. According to CNBC TV18, the currency's relative strength index rose to the highest level since 2013, underscoring the pace of the currency's advance. However, experts are warning of potential overextension as the won has gained around 6% year-to-date, which looks increasingly stretched. As reported by Bank of New York Mellon strategist Geoffrey Yu, the strength could encourage domestic asset managers to unwind foreign-asset hedges or prompt renewed retail outbound equity investment. The currency trimmed its gains to 0.4% against the dollar in the afternoon after Yonhap Infomax reported that the National Pension Service had halted its foreign-exchange hedging and resumed dollar purchases, with the pension fund declining to comment when contacted by Bloomberg News.
South Korean shares surged nearly 3% on Tuesday, led by semiconductor giants Samsung Electronics and SK Hynix, as optimism over sustained artificial intelligence investment and strong semiconductor demand lifted investor sentiment. According to reports from The Economic Times and Reuters, the benchmark KOSPI gained 1.25% to 7,083.84 by late morning in Seoul, building on Monday's advance of more than 4%, which was its sharpest single-day move in months. The rally was particularly driven by the OpenAI AI debut, which has powered the chip sector rally and reinforced optimism toward artificial general intelligence applications. Latest developments show the OpenAI unveiling of GPT-6 Astra has further reignited investor optimism about the artificial intelligence sector's outlook, fueling expectations for robust demand for high-bandwidth memory (HBM) and advanced-node chips. Samsung Electronics gained 1.48% to 274,000 won, while SK Hynix jumped 3.65% to 1,848,000 won. State-run Korea Electric Power Co. added 3.82%, and refiner SK Innovation rose 1.6%.
Foreign investors continued their strong buying streak in South Korean equities, purchasing over a net 1.8 trillion won ($1.3 billion) of Korean stocks on the Kospi Index on Monday, extending inflows to a third consecutive session, according to exchange data. As reported by CNBC TV18, the sustained foreign investment has provided additional support for the currency and broader market rally. The Kosdaq also advanced, opening 1.16% higher and trading above the 820-point level, indicating broad-based strength across South Korean equity markets. The continued demand for Korean assets may provide further support for the won, though the speed of gains may be harder to sustain given the current momentum levels. Japan's Nikkei 225 fell 0.95% and the small-cap Kosdaq Index rose 0.46%, underscoring how unevenly the AI trade is playing out across the region.
The chip rally has now spread to semiconductor materials, components and equipment stocks, with the "Astra effect" spreading from South Korea's large-cap chipmakers to the broader semiconductor ecosystem. As of 10:22 a.m. on Monday, Samsung Electronics traded at 265,000 won, up 3.82% from the previous session, while SK Hynix rose 5.89% to 1.745 million won. Shares tied to back-end processing and packaging have posted the strongest gains, driven by expectations that artificial intelligence demand will lift the memory chip market. Doosan Tesna jumped as much as 12.25% during the session to 83,500 won, while Psk Holdings gained more than 8%. Equipment and back-end names including DB HiTek (12.46%), TES (4.97%), and EO Technics (64.85%) also advanced significantly. The strength in large caps has extended to back-end processing, packaging and other suppliers, with Eugene Technology, Soulbrain, and Wonik IPS also stronger in early trading.
Last month, Samsung Electronics said it will spend up to 110 trillion won ($81.8 billion) to share its artificial intelligence windfall, in one of the largest ever shareholder-return programs worldwide. While it didn't specify how much will be used for buybacks, there's a 26% gap between the preferred stock and common equity. That spread is at its widest in more than a decade, according to Bloomberg-compiled data, even after narrowing from 37% in recent months due to buyback expectations. Hyundai Motor also announced in August a stock buyback program that includes preferred shares, with Hyundai's common shares' premium over preferreds currently exceeding 50%. Under Korean law, Samsung's financial affiliates can't hold more than 10% of voting common stock. A large buyback of the normal equity would push affiliates, which are linked to the founding family, above that threshold and force sales. By repurchasing preferred shares, it avoids disrupting this ownership structure, while also lifting valuations and helping chip away at the Korea Discount.
