The Secret Behind Samsung Electronics' Delayed Shareholder Return: Financial Industry Separation Act and Government Meeting

CEO Choi Hyun-deok revealed that there is a secret behind the announcement of Samsung Electronics' shareholder return policy. He hinted that this is new information not covered by any other broadcast and that he would explain it in detail shortly.

He mentioned that this secret is related to the timing of the announcement and could significantly impact Samsung Electronics' stock price if the truth is revealed.

Therefore, he emphasized that this information will be highly significant for market participants.

Despite the 30-year US Treasury yield once again surpassing 5.3%, the market reacted positively. This is because the market interprets the rising interest rates as a clear signal that the Treasury Department intends to curb them.

CEO Choi Hyun-deok explained that there is an expectation of Treasury Department intervention if the 10-year Treasury yield approaches 4.75%, which is considered the market's bottom line.

Consequently, this suggests that the market's interpretation of rising interest rates is shifting from past fear to a positive outlook.

Bank of America and others regard the US Treasury's long-term bond purchase policy as 'modified QE (Quantitative Easing).' This is an attempt to temporarily limit interest rate increases by expanding the scale of long-term bond buybacks.

However, critics argue that this policy merely buys time rather than addressing fundamental fiscal deficit problems, and could exacerbate the fiscal deficit in the long run.

The Iranian Revolutionary Guard has made positive statements about negotiations as they face economic pressure. This suggests that Iran is changing its stance as funding for regime maintenance is cut off.

Furthermore, an increase in clandestine oil shipments through the Strait of Hormuz suggests a weakening of Iran's control.

There is caution regarding the policy uncertainty of former President Trump in the US presidential election.

Market participants suggest that the current market could be supported until oil prices decline.

Midterm election results significantly impact the momentum of US policy. Analysis suggests that for consistent policies in key sectors like AI, shipbuilding, and defense, a Republican victory in the midterm elections is crucial.

If Republicans lose the midterm elections and policies are obstructed by Democrats, the loss of policy consistency could lead to considerable difficulties in the stock market, warned CEO Choi Hyun-deok.

This indicates that the growth of specific industries can be heavily dependent on the political environment.

Analysis of option position data from last week's options expiration day showed that put options on SPX (which tracks the S&P 500) outnumbered call options by 2.5 times. This means more investors were betting on a decline.

However, despite this high put option ratio, the index did not fall significantly and was defended, which is noteworthy.

This suggests that bargain hunting is spreading beyond the semiconductor sector to other sectors, supporting the market's robust trend.

Samsung Electronics announced that the specific details of its special dividend would be released in October. This has been evaluated as insufficient shareholder return guidance, contrary to market expectations.

Compared to SK Hynix's announcement of a 40 trillion won shareholder return plan, Samsung Electronics' delay in specific announcements has disappointed the market.

Samsung Electronics provided annual shareholder return guidance of KRW 90 trillion to KRW 110 trillion. This was evaluated as contributing to the resolution of uncertainty.

Along with this, it announced a cash dividend plan of approximately KRW 30 trillion per quarter and stated that it would purchase KRW 15 trillion worth of treasury shares over three months for employee stock compensation.

SK Hynix is employing a strategy of buying back and retiring treasury shares to enable additional ADR (American Depositary Receipt) issuance. This secures the capacity to purchase underlying shares when additional ADRs are issued.

To issue additional ADRs, SK Square's 20% stake must be maintained, so the company is increasing its shareholding through treasury stock retirement to secure ADR issuance capacity.

Furthermore, there is an advantage in being able to purchase treasury shares at a lower price compared to the KRW 45 trillion raised through US listing.

The Financial Industry Separation Act poses a significant obstacle to Samsung Electronics' treasury share buybacks, which are part of its shareholder return policy. The Act restricts financial affiliates from holding more than a certain limit (20%) of Samsung Electronics' shares.

If treasury shares are retired, the major shareholder's stake increases, which could force financial affiliates like Samsung Life Insurance to sell their Samsung Electronics shares through a block deal.

Therefore, the problem arises that even if Samsung Electronics uses the same amount for shareholder returns, the efficiency of treasury share buybacks is limited.

With the government's intention to boost the stock market and corporate demands for improved efficiency in shareholder returns, there is a possibility that easing the Financial Industry Separation Act will be discussed at the meeting between Chairman Lee Jae-yong and the President on the 26th.

It is observed that Chairman Lee Jae-yong may mention the difficulties in treasury share repurchases due to the Financial Industry Act, which hinders market revitalization.

If the easing of the Financial Industry Act becomes a public discussion, expectations for Samsung Electronics' large-scale treasury share repurchases are likely to grow.

The main reason Samsung Electronics' shareholder return policy has not yet been finalized is believed to be the regulations of the Financial Industry Separation Act.

Attention is focused on whether the possibility of easing or applying exceptions to the Financial Industry Act will open up after the meeting between Chairman Lee Jae-yong and President Lee Jae-myeong.

NVIDIA's earnings are expected to exceed high market expectations, indicating robust demand from hyperscaler companies.

This earnings announcement will serve as an opportunity to reconfirm AI-related demand, and long-term supply agreements for HBM are also anticipated.

Goldman Sachs, through its Silicon Valley survey, diagnosed that AI competition is shifting towards workflow dominance. New computing demand is projected to increase 20-fold over the next five years.

Among these, the disparity between memory stock prices and earnings was deemed the most attractive investment opportunity.

This suggests that the importance of memory semiconductors as a core infrastructure in the AI era will further increase.

Demand for ESS (Energy Storage Systems) is skyrocketing in the North American market. This is attributed to the increasing construction of data centers and expanded investment in power grids.

The ESS market is growing, primarily centered on large batteries, and in response to this increased demand, major battery companies like LG Energy Solution are moving to convert their ESS production lines.

With rising lithium prices and recovering battery utilization rates, the overall secondary battery market is experiencing a positive impact.

This trend is expected to be a key driving force supporting the continued growth of the secondary battery industry.