Explained: Why Samsung shares tanked 8% while rival SK Hynix traded higher on Monday

Shares of Samsung Electronics fell 8% in early trade on Monday after the South Korean chipmaker’s record $79 billion shareholder-return plan fell short of investor expectations. Investors had been looking for a larger share of the company’s AI-driven cash windfall and greater clarity on its plans for share buybacks.

Samsung said on Friday that shareholder returns for this year would range between 90 trillion won and 110 trillion won ($65 billion to $80 billion), including 30 trillion won in cash dividends in the third quarter.

The planned returns are five times Samsung’s previous record high of 2020. However, analysts said the projected amount was below their expectations and noted that the company provided limited details on its buyback plans.


Also read: South Korea plans chip windfall fund to back youth, AI investment

Under its 2024 to 2026 shareholder-return policy, Samsung said it remains committed to returning 50% of the free cash flow accumulated over the three-year period to shareholders.

The announcement stood in contrast to rival SK Hynix, which said last week that it would buy back and cancel 40 trillion won of treasury shares and allocate more than 50% of its free cash flow generated between 2025 and 2027 towards boosting shareholder returns.

SK Hynix shares rose half a percent on Monday, while the benchmark KOSPI index fell more than 2%.

"Unlike SK Hynix, Samsung Electronics did not mention the possibility of raising its existing shareholder return policy, nor did it announce a plan to cancel treasury shares that could more directly contribute to a stock price increase, which is disappointing," Sohn In-joon, an analyst at Eugene Securities, told Reuters.

Morgan Stanley described the plan as "big capital returns, slightly below expectations".

The brokerage said investors would now need to watch Samsung's January decision on how it allocates the remaining 60 trillion won to 80 trillion won, along with the company's next capital-return framework, which will take effect next year.

Asian stock markets today

Asian share markets were largely flat on Monday, while oil prices eased as investors waited for details of the US sanctions against Iran expected later in the session. The Canadian dollar also weakened as a trade conflict with its southern neighbour loomed.

Japan's Nikkei was nearly flat after falling almost 4% last week. South Korean shares declined over 2%, while Taiwan's benchmark index slipped 0.5%.

Read more: Korea’s leverage trap has an echo in India

Investors across the technology sector were focused on Nvidia’s results due on Wednesday, with markets aware of the challenge facing the chipmaker as it seeks to meet exceptionally high expectations.

Markets are pricing in about a 40% chance that the Federal Reserve will raise interest rates at its September 16 meeting, while a rate move by December is fully priced in.

Those expectations could shift depending on US inflation data due this week. Median forecasts indicate that core inflation is expected to remain at 3.3% in July.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)