Martial law fiasco threatens major firms' buyback programs

By Nam Hyun-woo

President Yoon Suk Yeol’s abrupt declaration of martial law and the subsequent political attempts to impeach him are threatening major Korean conglomerates’ efforts to boost their share values, as plunging stock markets are rendering their trillion-won buyback programs in vain.

The country’s top cap Samsung Electronics closed at 54,000 won on Tuesday, up 1.12 percent from a session earlier. Samsung's stock price has been hovering between 53,000 won and 54,000 won for the past week, as investors’ anxiety over the country’s financial markets is limiting the stock’s rebound.

On Nov. 15, Samsung Electronics announced it would buy back its shares worth 10 trillion won ($7.17 billion) over the next year to prevent further declines in its falling stock price. As part of the program, the company said it would repurchase and cancel 3 trillion won worth of shares by Feb. 17.

These announcements pumped up its stock by 7.21 percent from 49,900 won a day earlier to 53,500 won, and pushed it up gradually to 58,300 won on Nov. 26.

However, the momentum did not last any longer as the pessimistic outlook on the global DRAM prices cast doubts on the company’s earnings for the fourth quarter of this year.

Since Yoon declared martial law on Dec. 3 and lifted it six hours later, the stock price has not been showing signs of recovery as overseas investors remain concerned about Korea’s political instability. From Dec. 4 to Monday, foreign investors net sold 361.2 billion won worth of Samsung’s shares.

Given that Samsung Electronics has been buying back 700,000 to 1.5 million shares every session since Nov. 20, the company is assumed to have spent approximately 700 billion won already. However, its effectiveness is now in question, as share buyback programs are mostly effective for short-term increases.

LG Group is also facing similar questions. Among its 11 listed companies, eight have posted their respective programs to improve share value recently.

Of them, the group’s holding firm, LG Corp., said on Nov. 22 it plans to cancel its treasury stocks worth 500 billion won by 2026, but saw its stock price sliding back to 74,600 won on Tuesday from 76,600 won on Nov. 25.

Hyundai Motor Group also announced on Nov. 27 that it would launch a buyback program worth 1 trillion won, but its stock price fell from 219,000 won on Nov. 28 to 210,500 won on Tuesday.

Industry officials said stock prices are struggling due largely to investors’ frozen sentiment toward the domestic financial markets, but added that the martial law fiasco is dealing more critical blows.

“Businesses implement various programs to enhance shareholder value, with buyback programs widely regarded as one of the most effective methods for achieving short-term improvements,” a conglomerate official said.

“Given that major firms announced their buyback programs in November, they were expecting signs of recovery around this time. However, the political turmoil seems to be weighing heavily on the stock market, leaving businesses with no choice but to hope for a swift resolution to the current situation.”