"What happens to share prices when the buybacks end?"
The share buyback programs at Samsung Electronics and SK hynix are on track to conclude in early October — sooner than originally expected.
A critical deadline is approaching for the roughly 11 million investors holding shares in the two chipmakers.
Both companies have been buying back shares at a pace far exceeding initial projections. As of Thursday, Samsung Electronics had repurchased 19.8 million shares (37.2% of its buyback target), while SK hynix had bought back 7.8 million shares (32.4%). At the current rate, the combined 55 trillion won ($40.5 billion) program — originally scheduled to run through November — could be exhausted as early as October.
According to Korea Exchange data released Sunday, foreign investors were net sellers of 2.51 trillion won worth of shares last week (Aug. 31–Sept. 4), with individual investors offloading 2.31 trillion won and institutions selling 1.6 trillion won. The combined selling pressure from all three major market participants reached 6.43 trillion won.
The sole buyer absorbing that wave of selling was the "other corporations" category, which posted net purchases of 6.45 trillion won — a figure that corresponds almost exactly to the ongoing buyback activity by Samsung Electronics and SK hynix under their combined 55 trillion won program.
SK hynix has committed 40 trillion won to repurchase 24.07 million common shares — about 3.3% of its outstanding stock — with all repurchased shares to be canceled. Samsung Electronics, meanwhile, is acquiring 53.285 million shares worth 15 trillion won for stock compensation purposes.
The buybacks have effectively served as a supply-and-demand buffer, propping up the floor of both stocks. As of Friday, Samsung Electronics held the 255,500 won line while SK hynix defended the 1.647 million won level.
The real question is what happens after the buybacks end in early October. Foreign investors have continued to sell Korean equities as government bond yields surge, and the two chipmakers' buyback programs have been artificially absorbing that selling pressure.
If foreign selling does not abate once the buybacks conclude, both stocks could face renewed downward pressure.
Some analysts, however, offer a more optimistic outlook. Nomura Securities said Samsung Electronics and SK hynix are poised for a rebound after recent corrections, citing solid fundamentals.
Nomura maintained buy ratings on both stocks, keeping its price targets at 670,000 won for Samsung Electronics and 4.7 million won for SK hynix. The brokerage's report noted that the two memory chip makers' share prices have fallen roughly 37 percent from their peaks, leaving them trading at an average of just three times their projected 2027 price-to-earnings ratios — a level it described as severely undervalued.
"The memory market is currently experiencing unprecedented demand strength driven by the AI investment cycle, while supply remains woefully inadequate," Nomura said, adding that global memory production capacity would need to double to 7.2 million wafers per month within four years, and triple to 11 million wafers per month within six years, to keep pace with surging demand.
Nomura said aggressive capacity expansion by Chinese manufacturers would have only a marginal impact on overall supply and demand, and projected that a supply shortage would persist through 2028. Won strength was flagged as a near-term risk, however, prompting Nomura to trim its third-quarter operating profit estimate for SK hynix to 77 trillion won from a prior forecast of 86 trillion won, while projecting 107 trillion won for Samsung Electronics.
park@heraldcorp.com
