S&P expects SK Hynix to launch another share buyback of up to 40 trillion won in the fourth quarter, coupled with generous dividends, providing a new catalyst for the South Korean value-up rally.

On September 8, S&P Global Market Intelligence's latest forecast showed that, driven by the strong demand for AI memory chips, SK Hynix is expected to announce a new round of share buybacks in the fourth quarter of this year, with the scale estimated to be between 20 trillion and 40 trillion won (approximately US$28 billion).

Furthermore, even after completing a large-scale share buyback, the company still has the ability to distribute generous dividends, which provides a strong catalyst for the South Korean government's "value-up" initiative and the restructuring of shareholder returns.

Mohammad Hassan, head of Asia Pacific equity dividend forecasts at S&P, said in an interview that the lower limit of SK Hynix's new round of share buybacks is expected to be 20 trillion won, "but it is also possible that it will once again reach the upper limit of 40 trillion won."

Boosted by this expectation, SK Hynix's ADR surged over 6% on Tuesday, closing at $187.99. After the South Korean stock market opened on Wednesday, SK Hynix's Korean shares rose as much as 5%.

He also predicted that more South Korean listed companies would follow suit and announce share buyback plans in the fourth quarter. Hassan added:

More and more companies will follow this practice, as it sets a new benchmark for the market to provide reasonable returns to investors for listed companies.

Buybacks are becoming the norm, and cash flow supports a combination of high buybacks and high dividends.

S&P believes that SK Hynix's shareholder return initiatives are shifting from traditional "one-off boosts" to "mechanized and normalized" approaches.

Previously, SK Hynix had implemented a 40 trillion won share buyback and cancellation plan and pledged to use more than 50% of its free cash flow (FCF) to reward shareholders.

More importantly, thanks to its excellent cash flow, SK Hynix still has the ability to distribute “a considerable and generous dividend” even if it continues to carry out large-scale share buybacks amounting to trillions of won.

To completely reverse the long-standing "Korean discount" phenomenon in the South Korean capital market, the South Korean government previously vigorously promoted the "Corporate Value Enhancement Plan," encouraging companies to strengthen market value management through means such as canceling treasury shares and increasing dividends.

Previously, Samsung Electronics had taken the lead in responding to regulatory guidance by canceling more than 87 million treasury shares and launching a huge dividend plan.

Hassan commented that Samsung Electronics' record dividend, coupled with SK Hynix's regular share buybacks, will set a new benchmark for market capitalization management and corporate governance in the South Korean capital market, which is a major positive for the entire South Korean stock market.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.