Samsung Electronics Shareholder Return Announcement Imminent, Market Expectations and Concerns Intersect… What's the Next Step for the Semiconductor Rally?

Samsung Electronics is set to announce its board meeting results today at 4 PM, with the market expecting a shareholder return plan worth between 100 and 150 trillion Korean Won. Kim Jang-yeol, Center Head, stated, “They say it's at 4 PM. Right. Yes. It seems like the board of directors will finalize and announce it soon.” This announcement is highly anticipated by the market and is expected to significantly impact Samsung Electronics' stock price.

Concerns have been raised that Samsung Electronics' shareholder return announcement might be interpreted as an 'exposure of positive news' rather than a direct market boon. This is because the expectation of the announcement has already driven Samsung Electronics' stock price up by 13-14%. Jang Ho-jin, CEO, pointed out, “When Samsung Electronics makes its announcement, we need to see whether we should cheer or view it as the exposure of good news.” He warned of a potential 'sell-on-news' phenomenon, meaning investors might sell off shares for profit after buying in anticipation of the news.

Controversy has also arisen regarding the legitimacy of Samsung Electronics' estimated shareholder return of 150 trillion Korean Won. Kim Jang-yeol, Center Head, analyzed that a 150 trillion Won shareholder return would be possible given an operating profit of 350 trillion Won next year. However, if the actual return is lower, the market might interpret it as a downward revision of operating profit forecasts or that funds will be used for other purposes (such as investment). This could lead to greater disappointment if market expectations for shareholder returns are not met.

An analysis suggests that share buybacks could act as an event-driven factor with short-term supply and demand effects. Jang Ho-jin, CEO, noted that share buybacks are currently supporting the market, raising uncertainty about the stock's additional upward momentum after the buyback ends. This implies that stock price increases due to share buybacks might be temporary, and sustained upward movement cannot be expected without fundamental corporate value growth. Investors should monitor market movements closely after the share buyback.

Kakao announced plans for a human spin-off, dividing into KakaoTalk (AI) and KakaoX (holding company), but the market reacted negatively, perceiving it as a 'split listing.' Jang Ho-jin, CEO, stated, “They're spinning off Kakao AI, but if you do that, will the value of the divided business go up, and will Kakao rise further? The answer is no. Rather, shareholders said, 'Hey, this is also a split listing, isn't it?'” This suggests that shareholders' distrust from past physical spin-offs influenced the reaction to this human spin-off.

Despite Kakao's official announcement denying a holding company conversion plan, fundamental limitations of its AI strategy were pointed out, along with concerns about low actual usage of AI services within KakaoTalk. Min Jae-ki, Team Leader, questioned, “We need to fundamentally ask whether integrating AI into KakaoTalk will truly be competitive.” As analysis suggests it's difficult to successfully transplant the network effects of existing platforms to AI, the market's skeptical view of Kakao's AI strategy is growing.

An evaluation of the effectiveness of Samsung Electronics and Kakao's shareholder return policies was provided. Min Jae-ki, Team Leader, pointed out that shareholder returns do not always positively impact corporate value, and if fundamentals deteriorate, shareholder returns may only serve as downside support. Analysis from the U.S. market also suggests that stock prices are unlikely to surge solely due to shareholder returns. This implies that shareholder returns have limitations without fundamental corporate growth drivers.

Analysis was presented on the rumor that Bitcoin could be incorporated as a strategic asset, alongside the U.S. Treasury's intent to issue short-term debt and activate stablecoins. Min Jae-ki, Team Leader, explained that the U.S. Treasury focused on stablecoins when looking for entities to accept short-term debt, analyzing this as a policy background for liquidity flowing into the coin market. While these temporary measures are expected to provide short-term liquidity to the market, their long-term impact remains to be seen.

The decision by Samsung SDI to sell its 4.4 trillion Korean Won stake in Samsung Display is analyzed as an intent to secure capital for investment in a joint venture with GM and for battery facility conversion. Hong Seon-ae, Team Leader, mentioned, “They sold the stake because Samsung SDI recently acquired all shares in a joint venture with GM, and there was talk about converting to batteries rather than electric vehicles.” She added that this was a financial strategy already anticipated in existing analyst reports. This stake sale is considered a crucial decision for Samsung SDI to secure future growth engines.

A strategy was proposed to secure a cash position in preparation for a stock market rebound if interest rates are maintained. Min Jae-ki, Team Leader, advised, “If interest rates don't fall but stock prices rebound, I recommend building up some cash reserves.” This implies the importance of having a cash buffer to prepare for unexpected market shocks, serving as a way for investors to protect their assets in an uncertain market.

It is projected that the U.S. government will try to suppress factors that could negatively impact the stock market as much as possible until the U.S. presidential election in November. Min Jae-ki, Team Leader, predicted, “I think the U.S. government will try to block any negative factors, especially those that could adversely affect the stock market, until November 3rd.” However, a shock from inflation and interest rates could occur after the election, so investors should prepare for market volatility post-election.

Analysis suggests that the government's strong pressure on companies to induce a stronger Korean Won was the critical turning point for the exchange rate decline. Kim Jun, Researcher, stated, “The decisive turning point wasn't any special level at 1,560 won, but rather the government and the Bank of Korea pressuring companies played a key role.” He explained that the government pressured export companies to sell dollars and intervened through tax audits to drive down the exchange rate. This indicates that policy intervention beyond market logic significantly influenced the exchange rate.

Even when corporate reinvestment is needed, the perspective that shareholder returns are an essential strategy for corporate survival was presented. Min Jae-ki, Team Leader, emphasized, “Shareholder returns must continue. That's how a company can survive long-term, and I think this year, 2026, might be the first year of shareholder returns.” This means that increasing shareholder value from a long-term perspective is more important for a company's sustainable growth than short-term reinvestment. The view that 2026 will be the inaugural year of shareholder returns in Korea reflects this perspective.

Criticism arose regarding significant market disappointment over Samsung Electronics' method of shareholder returns. Min Jae-ki, Team Leader, stated, “The biggest disappointment is the method. It's not about instantly boosting the stock price by spraying cash; we need to see which is more effective: buying back and canceling treasury shares like Hynix, or cash dividends.” He compared it to SK Hynix's method of buying back and canceling treasury shares. There's a strong perception that share buybacks and cancellations are more positive for stock prices than one-off dividends, and this is reportedly leading to internal decision-making issues at Samsung Electronics. The market is calling for improvements in Samsung Electronics' shareholder return method.

Analysis suggests that domestic market volatility will decrease when the balance of leveraged ETFs, identified as a major cause of market volatility, falls below 3 trillion Korean Won. The current balance, in the mid-6 trillion Won range, is expected to enter the 3 trillion Won range in about three weeks. Min Jae-ki, Team Leader, stated, “When it drops below 4 trillion, entering the 3 trillion range, Korea's market volatility will decrease. It's expected to enter the 3 trillion range in about three weeks, and the Chuseok holiday period is likely to be a turning point.” This implies that the market is likely to return to a more normal state around the Chuseok holiday. Investors should monitor the trend of leveraged ETF balances.

Semiconductor materials, parts, and equipment (SooBuJang) and AI infrastructure-related stocks were suggested as future investment priorities. Min Jae-ki, Team Leader, emphasized, “Number one is SooBuJang. We're focusing on front-end process equipment rather than substrates. Next, data center-related stocks look promising due to bottlenecks.” Specifically, semiconductor front-end process equipment and data center-related stocks were identified as promising sectors. In contrast, a selective approach was recommended for the cosmetics sector. This is based on the expectation that the growth of the AI and semiconductor industries will continue, leading to active investment in related infrastructure.

While institutional investors have offered disappointed analyses of Samsung Electronics' shareholder return policy, individual investors, despite short-term disappointment, are maintaining long-term expectations. Min Jae-ki, Team Leader, explained the shift in individual investors' sentiment: “First, they were like, 'Oh, they did it.' Then, 'Oh, it feels a bit less than expected. Hynix did this, so why not more?' But then they think, 'Well, I'm not selling because of this, and it's good news anyway.' I also feel, 'I'm not going for short-term gains anyway; I'll hold on for the long term.'” This suggests that faith in long-term corporate growth is weighing more heavily than disappointment over the announcement's specifics.

A discussion compared Samsung Electronics' dividend-centric shareholder return policy with SK Hynix's share buyback method, focusing on their respective effects on stock price defense and supply/demand. Cha Young-ju, Team Leader, stated, “Hynix directly buys and cancels shares, which can provide some supply and demand defense against continued stock price declines caused by 'empty house raids.'” He explained that treasury stock cancellation is more effective for supply and demand defense. In contrast, Samsung Electronics' 30 trillion Won cash dividend was largely deemed disappointing in both amount and method. This highlights how the two companies' shareholder return methods can lead to different outcomes in terms of cash flow and stock price stabilization.

Regarding the controversy linking Samsung Electronics' increased dividends to the owner family's inheritance tax payments, it was argued that this issue is over as inheritance tax has now been fully paid. Cha Young-ju, Team Leader, explained, “Inheritance tax has been fully paid now. That issue is over. So, while you can't deny the major shareholder might have needed money, if it were specifically for that reason, then Chairman Choi would be in more urgent straits now. It's the same for Hyundai Motor. In September last year, during their IR, the CEO directly announced a special dividend for the first time since the company's founding.” This argument cautions against prematurely linking the major shareholder's cash needs to dividend policy, instead emphasizing strategic dividend decisions, using Hyundai Motor's case as an example.

Analysis suggests that instead of being disappointed by Samsung Electronics' shareholder return policy, a calm observation is necessary. Cha Young-ju, Team Leader, asked, “Should we be disappointed if Samsung Electronics' shareholder policy is a bit less than expected? They are using a piece-by-piece strategy, so even if Samsung Electronics announced 110 trillion Won, it's not the end.” He explained that Samsung Electronics is implementing its shareholder return policy in segments, implying that more policies could follow. Therefore, investors should monitor Samsung Electronics' actions from a long-term perspective.

A discussion took place regarding the definition and practical limits of long-term investment in the Korean stock market. Cha Young-ju, Team Leader, cited the long-term range-bound Kospi and stock selection risks, pointing out the danger of blindly believing in long-term investment based solely on a few successful cases. He stated, “If 5 years is long-term investment, I believe long-term investment can be the answer. If long-term investment means 1 to 5 years, I think it's sufficiently possible.” This presents a realistic timeframe for long-term investment, suggesting that in the unique context of the Korean market, unconditional long-term investment does not always guarantee success.

For beginner investors, opening an account for installment investing, depositing a fixed amount monthly for five years, was proposed as a strategic account management plan. Cha Young-ju, Team Leader, advised, “Open a new account. And commit to doing this as an installment investment for 5 years. ... If you aim to invest 100,000 won every month for 3 to 5 years, you might develop poor investment habits.” This strategy aims to help investors start with small amounts without significant capital, consistently invest for 3 to 5 years, and study companies' income statements and performance, thereby fostering sound investment habits.

Analysis suggests that a depreciation of the won does not directly lead to an inflow of foreign capital. Cha Young-ju, Team Leader, pointed out, “Simply assuming that foreign investors will enter Korea just because the exchange rate dropped from 1,500 to 1,400 won is only looking at one side. From foreign investors' perspective, what if I buy this and it moves in the opposite direction?” This explains that Middle East risks and political uncertainty act as bigger variables for foreign investors than expectations of exchange rate gains. Additionally, factors like hedge funds and private equity funds' year-end settlement periods must be considered in the supply and demand environment. Therefore, predicting foreign capital flows based solely on exchange rate fluctuations is difficult.