World · Daily TerminalBy Ankur Banerjee and Hyunjoo Jin - 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 due to 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.
'Samsung's record payout plan has been hailed as a milestone, but 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,' said Kim Kyu-shik, portfolio manager at Singapore-based hedge fund Vista Global Asset Management. 'The lack of any commitment to buyback sends a negative signal that Samsung does not view its shares as undervalued.'
A large buyback and cancellation programme could push holdings by key shareholders Samsung Life and Samsung Fire above regulatory ownership limits, potentially forcing them to reduce their stakes below 10%, drawing greater regulatory scrutiny of Samsung Electronics’ ownership structure and disrupting the family's control of its crown jewel, analysts and investors say.
'Samsung Electronics' shareholder returns are determined with shareholders at the center,' Samsung said in a statement to Reuters. 'A buyback is one of several tools available to us, not the only one, and our 2026 plan already combines a substantial cash dividend.'
Investors said the longer-term success of the Value-Up programme, which pushes companies towards improved governance and better capital allocation, will depend on whether other companies follow suit, particularly because participation remains voluntary.
'It is only going to be one of these two companies that takes the lead,' said Aadil Ebrahim, group head of equities at Klay Group. 'I believe a lot of other corporations will say
Source: Euronext Markets: Real-time Stock Market Data | live
