[MarketING] When Focusing on Shareholder Returns

Celltrion 3 Siblings Rise 4-5% on Share Buyback
Bank Stocks Strong This Year on Shareholder Return Hopes

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] As companies announced their earnings results last year along with shareholder return plans such as dividends and share buybacks, market attention is focusing on these measures. In a market characterized by rotation trading amid economic uncertainty, shareholder return plans are being analyzed as potential investment ideas.

Celltrion and Celltrion Healthcare Rise Over 5% on Share Buybacks

On the 1st, the KOSPI closed at 2449.80, up 24.72 points (1.02%) from the previous day. The KOSDAQ ended the day at 750.96, rising 10.47 points (1.41%).

The Celltrion trio showed notable strength. Celltrion rose 5.07% compared to the previous day, and Celltrion Healthcare increased by 5.42%. Celltrion Pharm also closed up 4.23%.

The news of share buybacks is interpreted as having led to the stock price increase. On that day, Celltrion and Celltrion Healthcare announced that they decided to repurchase shares to stabilize stock prices and enhance shareholder value. Celltrion plans to acquire a total of 309,406 shares for about 50 billion KRW, and Celltrion Healthcare plans to purchase 437,000 shares for about 25 billion KRW through on-market transactions.

Bank stocks also continued their strong performance this year amid expectations of shareholder returns. KB Financial Group's stock price rose 18.35% compared to the end of last year, and Shinhan Financial Group increased by 20.60%. Hana Financial Group and Woori Financial Group rose 17.0% and 10.82%, respectively. Junseop Jeong, a researcher at NH Investment & Securities, analyzed, "Since the beginning of this year, expectations for expanded shareholder returns centered on bank stocks have significantly formed. This is the result of efforts by financial holding companies to expand shareholder returns to improve excessively undervalued stock prices, combined with the demands of the capital market."

Amid ongoing rotation trading due to economic uncertainty, active shareholder return policies are expected to have a positive impact on stock prices. Jiyoung Han, a researcher at Kiwoom Securities, said, "Since the current market is characterized by limited upside and a rotation trading market with excessive declines due to macroeconomic uncertainties, dividends, share buybacks, and shareholder returns with low valuation appeal are judged to be clear investment ideas at this time."

Shareholder Returns Also Positive for Foreign Capital Inflows

Efforts by companies to expand shareholder returns are also positive for foreign capital inflows.

Recent foreign buying trends are also analyzed as being related to shareholder return plans. A researcher explained, "Starting with Meritz Financial Group's announcement of shareholder-friendly policies in November last year, followed by Hyundai Motor and Kia's announcements of dividend increases and share cancellations, market expectations for shareholder return policies of large-cap stocks have risen. Considering that Shinhan Financial Group, Hana Financial Group, and Hyundai Motor are among the top cumulative net buyers led by foreign demand during the January rally, the trend of foreign capital inflows is not unrelated to expectations for shareholder return policies."

The government's efforts to improve dividend procedures and share buyback systems are also expected to act as factors increasing the possibility of additional foreign demand inflows. The financial authorities announced the day before that they would improve dividend procedures through authoritative interpretations of the Commercial Act and amendments to the Capital Markets Act to allow investment decisions based on dividend amounts.

A researcher said, "In a box-range market, institutional improvements are creating a favorable environment for large-cap stocks' share buybacks and dividend increases, which are shareholder-friendly. After February, expectations that low shareholder return rates and institutional factors, which have long been discount factors for the domestic stock market, will gradually improve are being reflected, and the related capital inflow trend is expected to remain valid."