Samsung and SK Hynix Stop Buying Their Own Shares; Kospi Falls 5.5%

Seoul's stock market touched its lowest level since July 31 on Tuesday. The Kospi dipped below 6,000 intraday and closed down 5.46% at 6,035.35.

Two memory makers carried the decline again. Samsung Electronics fell 7.39% and SK Hynix 10.09%; together they make up more than half of the index weight.

At 9:47 a.m. local time, a sell-side sidecar kicked in and temporarily halted program sell orders. It was the first sidecar since Aug. 19.

Same Sellers, Different Buyer

Amounts are converted at roughly 1,340 won per dollar. According to the Korea Herald, foreign investors net sold $1.6B on Tuesday. That brings October to $6B and the year-to-date total to ₩199 trillion, about $149B.

Foreign selling is not new. Exchange data compiled by the Korea Times show foreigners sold $13.8B of shares between Aug. 20 and Sept. 18, yet the Kospi climbed to 7,000 in the same stretch.

The difference was on the other side of the trade. Corporations were net buyers of $24.8B over that period, mostly Samsung and SK Hynix buying back their own shares.

In the first week of October the picture flipped. Corporate buying shrank to $1.9B, and retail investors were the only net buyers.

The same selling was there a month ago. What changed was the buyer standing on the other side.

How Big a Buyer the Buybacks Were

Samsung launched a program for 53.3 million shares and SK Hynix one for 24.1 million. Together they total about ₩55 trillion, or $41B. Samsung finished on Oct. 6, and SK Hynix's program is about 90% complete.

A buyback is a price-insensitive buyer. The program commits to a set number of shares over a set period, and it does not step back as prices fall.

When that buyer leaves, price-sensitive investors absorb the same selling. They only buy at lower prices, so the same volume of selling pushes the market further down.

The Buyer's Exit Timeline

In September, Lee Kyoung-min of Daishin Securities said corporate buying would not be enough to stop the index from falling if foreign and institutional selling intensified.

The Part That Doesn't Fit

Buybacks are not the only explanation. Sources also cite CXMT's server-memory plans, Monday's 2.67% drop in the Philadelphia Semiconductor Index, high bond yields and oil. None of them weights these causes.

One analyst described the size of the exodus to the Korea Herald: "The outflows are too large to be attributed solely to portfolio rebalancing."

U.S. demand is holding up. SK Hynix's Nasdaq-listed ADR traded 40.42% above its Seoul price on Oct. 9. With the lock-up over, the company can close that gap by converting Korean shares into ADRs.

SK Group Chairman Chey Tae-won said more ADRs could be issued if returns were strong and the share price stable. Extra supply would narrow the premium between the ADR and Seoul.

The chart shows the closest U.S. relative of the Korean selloff; Micron fell 3.9% on Monday.

What It Means for Investors

• The market priced Korea's missing buyer, not memory prices; Samsung's record $80B quarterly operating profit did not stop the fall.
• For SK Hynix ADR holders, the main risk is not the Seoul price but a 40% premium closing through new ADR issuance.
• The thresholds to watch are whether foreign selling stays above ₩2 trillion a day and whether SK Hynix announces a new buyback on Oct. 27.
• The risk that breaks this thesis is CXMT winning customer qualification: the selloff would turn from a buyer problem into a pricing problem, hitting Micron and SanDisk directly.

This story draws on Oct. 12-13 reporting by the Korea Herald, AP, Seoul Economic Daily and the Korea Times. Buyback and investor-flow figures come from exchange data compiled by the Korea Times; the daily buying pace is calculated from those data. No source separately measures the buybacks' share of the decline. Dollar amounts use roughly 1,340 won per dollar.