By Ankur Banerjee and Hyunjoo Jin
SINGAPORE/SEOUL, Sept 10 (Reuters) – Eye-popping shareholder-return plans from Samsung Electronics and SK Hynix have become an early test of South Korea’s corporate reform drive, with investors welcoming the windfall but saying more is needed to narrow the country’s decades-old valuation gap.
An AI-driven boom has left South Korea’s two largest companies flush with cash, fuelling investor demands for larger payouts.
Yet the plans, worth more than 130 trillion won ($97 billion) combined for this year alone, have not fully satisfied investors. South Korea’s benchmark KOSPI, in which the two chipmakers account for nearly half of the index’s weighting, remains about 26% below the record high reached in June.
The muted reaction underscores the challenge facing President Lee Jae Myung’s “Value-Up” programme, launched in 2024 to tackle the so-called Korea discount, under which Korean stocks trade at lower valuations than global peers because of concerns over corporate governance, capital allocation and shareholder rights.
“The Korea discount is unlikely to disappear in the near term simply because Samsung and Hynix return more cash,” said Clarence Li, lead portfolio analyst at T. Rowe Price.
“It remains partly structural and will require sustained evidence across a much broader group of companies to participate,” Li said, adding the plans were a step in the right direction.
South Korean stocks are among the world’s best performers this year, gaining 67% on the back of the AI boom and rising earnings expectations. Even so, the KOSPI trades at just 4.3 times expected 2027 earnings, the lowest valuation multiple in the region and well below the Asia-Pacific index’s 11 times, according to Goldman Sachs data.
The gap highlights how much work remains to lift Korean corporate valuations, with investors unconvinced that other companies will follow the chipmakers’ lead.
“I would separate the very large absolute returns from Samsung and Hynix from the success of Korea’s Value-Up programme,” said Sammy Suzuki, head of emerging markets equities at AllianceBernstein.
“Much of the size of these payouts reflects the exceptional memory cycle and resulting cash generation rather than a fundamental change in capital-return philosophy. That partly explains why investors are still asking, ‘Is this enough?'”
“ACHILLES’ HEEL”
While Samsung’s record payout plan has been hailed as a milestone, some investors and analysts said the policy lacks detail and may rely heavily on special dividends that appear to benefit its controlling family more than minority shareholders.
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