Corporate Value Up program leads to record share buybacks and cancellations in South Korea

In a major move reflecting the impact of the corporate value-up program, Kia announced that it had repurchased 5.69 million shares worth 500 billion won (about $370 million) from Jan. 26 to March 14 and plans to cancel half of them. The announcement comes amid a general trend of increasing share repurchases and cancellations among listed companies in South Korea in the first half of this year.

According to the “First Half Market Trends Related to the Corporate Value-Up Program” released by the Korea Stock Exchange on July 10, share repurchases totaled 2.2 trillion won in the first half of this year, up 25.1% from 1.8 trillion won in the same period last year. Share redemptions saw an even more dramatic increase, rising 190.5% to 7 trillion won from 2.4 trillion won last year.

The Corporate Value-Up program, which aims to increase company value through mechanisms such as share buybacks and cancellations, has evidently driven these activities. Kia led the way with the largest share buyback in the first half of this year. Other notable companies that have engaged in share buybacks include Ssangyong C&E, which bought back 335 billion won worth of shares, and Krafton, with buybacks totaling 199.2 billion won.

In terms of stock cancellation, SK Innovation conducted the largest cancellation worth 793.6 billion won on February 20. Samsung C&T and Meritz Financial Group also conducted significant stock cancellations, worth 767.6 billion won and 640 billion won, respectively.

The Korea Exchange noted that there were a total of 10 value-added announcements in the first half of the year, including one from Meritz Financial Group on the 4th of this month. These announcements included four company value-added plans and six pre-announcements. Companies such as Kiwoom Securities, Kolmar Holdings, Meritz Financial Group and FnGuide announced their company value-added plans, while KB Financial Group, DB HiTek and Woori Financial Group made pre-announcements.

“In the early stages of program implementation, value appreciation disclosures are relatively more common in the securities and banking sectors because the price-to-book ratio (PBR) is generally low there,” said a Korea Exchange official.

Dividend payouts by listed companies also saw a slight increase. Total dividend payouts in the first half of this year amounted to 34.2 trillion won, up 3.7 percent from 32.9 trillion won in the same period last year.

Meanwhile, the KOSPI exceeded 2,800 in the first half of this year, supported by a sharp increase in net purchases by foreign investors, which totaled 22.4 trillion won by the end of June. Except for a net sale of 1.3 trillion won in May, foreign investors were net buyers in January (3.5 trillion won), February (7.9 trillion won), March (4.4 trillion won), April (3.4 trillion won) and June (4.6 trillion won) this year.

Looking ahead, the Korea Exchange stressed its commitment to further developing the KRX Korea Value-Up Index and related financial products. “In order for institutional investors such as pension funds to use it as a benchmark indicator, we will continue developing the KRX Korea Value-Up Index and related financial products such as ETFs and derivatives in the third and fourth quarters without any setbacks,” a Korea Exchange official said.

This sharp increase in share repurchases and cancellations, as well as increased foreign investment and dividend payouts, indicate a strong response to the Corporate Value Up program and reflect a strategic shift by South Korean companies aimed at increasing shareholder value and market performance.