Share buybacks by Korean listed companies have surpassed 9 trillion won ($6.2 billion) in just two months this year as the government intensifies its push for shareholder returns, raising expectations for stock cancellations.
According to the Korea Exchange on March 4, listed companies acquired a total of 9.14 trillion won worth of treasury shares from January through that day. The figure represents a 56.9% increase from 5.82 trillion won during the same period last year.
Market expectations for share cancellations following buybacks have grown since the National Assembly passed the third Commercial Act amendment on February 25, which mandates the retirement of repurchased shares. Stock prices of companies announcing buybacks have generally responded positively.
Among 71 companies that disclosed treasury share acquisitions during the period, 48 (67.6%) saw their stock prices rise the day after the announcement. After one week, 46 of 68 companies (67.6%) recorded gains, while 29 of 36 companies (80.6%) showed higher prices after one month.
Mirae Asset Securities surged 121.02% in the month following its announcement of a 60 billion won buyback program, with gains amplified by expectations for its SpaceX investment. LG Electronics rose 26.46% after disclosing a 100 billion won repurchase plan, while Hana Financial Group gained 19.98% following its 200 billion won buyback announcement.
Similar trends emerged among KOSDAQ-listed firms. Samji Electronics and JTC each climbed 46.02% and 40.47% respectively in the month after announcing 15 billion won buyback programs.
When companies use cash reserves to repurchase shares, the reduced float can support stock prices through improved supply-demand dynamics. Markets also interpret buybacks as signals that management views shares as undervalued. Share cancellations deliver more immediate benefits by reducing outstanding shares and boosting earnings per share.
However, analysts caution against viewing all buybacks as unconditionally positive. Shareholder return effects remain limited when acquired shares are not subsequently retired. Treasury share disposals also increased substantially during the same period—from just 4 companies disposing 15.9 billion won last year to 37 companies disposing 345.9 billion won this year.
The key focus at this year's shareholder meetings will be companies' commitment to share cancellations. "It is difficult to identify cancellation beneficiaries based solely on treasury share holdings," said Park Se-yeon, analyst at Hanwha Investment & Securities. "Investors need to examine controlling shareholders' incentives for cancellation, whether companies will use exemption clauses under the Commercial Act, and how related agenda items are processed."
The third Commercial Act amendment requires companies to cancel repurchased shares within one year in principle, with exceptions for employee compensation, employee stock ownership plans, legal obligations, and business purposes specified in corporate articles. Existing treasury shares must be retired within 18 months.