Despite foreign investors, retail investors, and institutional investors all showing a selling bias, the KOSPI recovered all of its losses and closed higher. The buying power of “Other Corporations” — stemming from massive share buybacks at Samsung Electronics and SK Hynix — provided a floor for the index. According to the Korea Exchange on the 1st, while foreign, retail, and institutional investors engaged in an unusual simultaneous net sell-off in the securities market the previous day, Other Corporations net purchased more than 1.5 trillion won (approximately $1.1 billion).

The KOSPI, which had fallen as much as 3.55% intraday to 6,547.76 as it digested headwinds including hawkish remarks from U.S. Federal Reserve Chair Kevin Warsh, recovered all of its losses on the strength of Other Corporations’ net buying and closed up 0.46% at 6,820.02. This marked the first time since October 18, 2017 — roughly 8 years and 10 months — that retail, foreign, and institutional investors simultaneously net sold on the KOSPI.

In past instances of simultaneous net selling, the combined net selling by the three investor groups peaked in the low 100 billion won range, but on this day the total reached 1.5773 trillion won (approximately $1.2 billion) — more than ten times larger. Other Corporations effectively absorbed all of it. Of Other Corporations’ net purchases, the amount flowing into Samsung Electronics and SK Hynix alone was 1.5455 trillion won (approximately $1.1 billion), accounting for 98% of the total.

Buybacks Create an ‘Endogenous Buying Force’

Other Corporations net purchased 11.6846 trillion won (approximately $8.5 billion) worth of shares in the securities market from the 20th to the 31st of last month, driving the index higher. During this period, foreign investors net sold 6.944 trillion won (approximately $5.1 billion), retail investors net sold 2.987 trillion won (approximately $2.2 billion), and institutional investors net sold 1.7281 trillion won (approximately $1.3 billion), yet the KOSPI still rose 5.39% thanks to Other Corporations. On a monthly basis for August, Other Corporations net purchased 11.994 trillion won (approximately $8.8 billion), more than five times the monthly average of 2.301 trillion won (approximately $1.7 billion) recorded through July of this year.

The buying by Other Corporations is largely attributed to share buybacks by Samsung Electronics and SK Hynix. According to KIND treasury share acquisition disclosures, cumulative net buyback volume since the 20th of last month reached 11.8365 trillion won (approximately $8.7 billion), comprising 3.0545 trillion won (approximately $2.2 billion) or 11.8 million shares at Samsung Electronics and 8.782 trillion won (approximately $6.4 billion) or 5.2 million shares at SK Hynix. Execution rates against their respective plans stand at 22.14% and 21.6%.

Samsung Electronics plans to purchase approximately 15 trillion won (approximately $11.0 billion) worth of its own shares — 53,285,968 shares — on the open market through Samsung Securities, Shinhan Investment & Securities, and KB Securities from the 24th of last month through November 21. SK Hynix plans to purchase 40.0043 trillion won (approximately $29.2 billion) worth of its own shares — 24.07 million shares — on the open market through SK Securities from the 20th of last month through November 19. With less than 20% of the two companies’ buyback plans executed, expectations are growing that treasury share purchases will serve as a key supply-demand force in the South Korean stock market for the time being.

Analysts: ‘Cushioning Declines and Absorbing Supply’

Roh Dong-gil, an analyst at Shinhan Investment & Securities, said, “An endogenous buying force has emerged in the South Korean stock market,” adding, “During the period of August 24–28, when Samsung Electronics and SK Hynix were both buying, their combined treasury share acquisitions totaled 8.05 trillion won (approximately $5.9 billion), matching foreign investors’ net selling of KOSPI spot shares over the same period.”

The analyst noted, “Controlling for market returns, foreign investor flows, prior-day returns, and differences in buyback timing across 660 trading days for Samsung Electronics and 95 trading days for SK Hynix, a 10 percentage point increase in buyback intensity was associated with excess returns of 0.09 percentage points and 0.17 percentage points respectively relative to the market.” He added, “The role of buybacks is not to mechanically raise target prices. They cushion declines from the same selling shocks and absorb floating supply.”

Kwon Beom-seok, a senior analyst at Samsung Securities, said, “The main net buying force to replace retail investors will likely be ‘Other Corporations,’ led by Samsung Electronics and SK Hynix,” adding, “If the two companies continue buying at the current pace, the net buying trend from Other Corporations should persist for roughly 30 more trading days — at least a month and a half.”

He highlighted that the two companies’ planned buyback amounts are comparable to this year’s peak in retail investor net buying. “On a one-month rolling basis, retail investors net purchased 56.5 trillion won (approximately $41.3 billion) on June 5, marking a record high, and the combined 55 trillion won (approximately $40.2 billion) in planned buybacks by Samsung Electronics and SK Hynix is not far off,” he said. “This supports the possibility that the primary net buying force is shifting from retail investors to Other Corporations.”

Foreign, Institutional, and Retail Flows Deteriorate

Foreign investors sold 10.176 trillion won (approximately $7.4 billion) in the KOSPI market last month alone, marking a fourth consecutive month of net selling. The scale exceeded the 9.894 trillion won (approximately $7.2 billion) net sold in July, when the KOSPI plunged to the 5,200 level. Flows improved through mid-August as the KOSPI rebounded, but selling resumed as risks from rising long-term interest rates and oil prices came to the fore.

Institutional investors also turned net sellers, offloading 5.064 trillion won (approximately $3.7 billion). The sharp deterioration in financial investment flows was a major factor. Financial investment had recorded net buying through July this year amid the expansion of the ETF market, but flows contracted sharply last month with net selling of 2.145 trillion won (approximately $1.6 billion). ETF net assets, which had surpassed 500 trillion won (approximately $365.4 billion) at one point in June, declined to the 450 trillion won range (approximately $328.9 billion).

Retail investor flows have also stalled. Retail investors bought 3.235 trillion won (approximately $2.4 billion) in August, marking a fourth consecutive month of net buying, but this was less than one-tenth of the 35 trillion won (approximately $25.6 billion) in May and 42 trillion won (approximately $30.7 billion) in June. Retail stock deposit balances also fell back below 100 trillion won (approximately $73.1 billion).

Kang Jin-hyuk, an analyst at Shinhan Investment & Securities, said, “Samsung Electronics and SK Hynix have disclosed plans to acquire a combined 55 trillion won worth of treasury shares by mid-November, and based on a simple conversion of cumulative net buying from the 20th through the 31st, the trend could continue for roughly 27 trading days.” He added, “However, since buybacks are not an upside catalyst, confirmation of improving industry conditions through export data or a shift to foreign buying driven by easing macro uncertainty will be necessary.”

Semiconductor Industry Expectations Provide Support

The KOSPI’s rebound on the 31st of last month was also supported by expectations for the semiconductor industry, in addition to the buybacks. SK Group Chairman Chey Tae-won, who was visiting Japan to attend a Korea-Japan Chamber of Commerce and Industry chairmen’s meeting in Sendai, told Bloomberg in an interview that the group is reviewing the feasibility of a joint venture factory in Japan for memory chip production as one option to meet surging artificial intelligence (AI) demand and reduce production costs.

“We are looking across Japan. We are considering anywhere with abundant power and water,” he said. He declined to answer questions about potential partners or specific locations in Japan.

Among large-cap stocks, major semiconductor names that had shown weakness early in the session turned higher. Samsung Electronics closed up 3,000 won (approximately $2.2), or 1.17%, at 260,000 won (approximately $190), while SK Hynix rose 21,000 won (approximately $15), or 1.27%, to 1.674 million won (approximately $1,200). Expectations for the semiconductor cycle, supported by Nvidia’s solid earnings, also underpinned investor sentiment.

Lee Kyung-min, an analyst at Daishin Securities, said, “The South Korean stock market opened lower as it digested external variables including the Jackson Hole meeting and military conflict between the U.S. and Iran, but excessive caution eased as the rise in U.S. Treasury yields stabilized.” He added, “With Other Corporations’ net buying supporting the downside for the top two semiconductor names, large-cap semiconductor stocks recovered their intraday losses, and the South Korean market showed a weak-start, strong-finish pattern.”

The issue is that the two companies’ large-scale buybacks will not serve as a permanent backstop for the stock market. Analysts caution that once the planned buybacks conclude in about a month, the market could enter another correction phase if no new active buying force — such as foreign or institutional investors — emerges.