Analysis-Samsung, SK Hynix payouts test South Korea’s reform drive as investors seek more

Samsung Electronics and SK Hynix have unveiled record shareholder-return plans, marking a significant early test of South Korea's corporate reform efforts. The plans, amounting to over 130 trillion won ($97 billion) for the year, have received a positive response from investors who are seeking larger payouts. However, the announcements have fallen short of fully satisfying investors, as the KOSPI, in which the two chipmakers account for nearly half of the index's weighting, remains about 26% below its June record high.

The muted reaction underscores the challenge faced by President Lee Jae Myung's "Value-Up" programme, which aims to address the so-called Korea discount. Despite the companies' increased cash generation, the plans are not expected to fully narrow the valuation gap between Korean and global stocks, as the discount is partly structural and requires sustained evidence across a broader group of companies to be addressed.

Investors remain unconvinced that other companies will follow Samsung and Hynix's lead, with some expressing disappointment over the lack of commitment to share buybacks. The success of the Value-Up programme, which promotes improved governance and better capital allocation, will depend on whether other companies follow suit, particularly given the voluntary nature of participation.