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An artificial intelligence-driven boom has left South Korea’s two biggest companies flush with cash, increasing pressure from investors for larger returns. Their combined shareholder-return plans are worth more than 130 trillion won ($97 billion) this year alone, Reuters said in a report. Read more: Global Market: Japanese bond yields rise as oil surge, hawkish BOJ remarks lift rate hike bets However, the announcements have failed to fully satisfy investors. The benchmark KOSPI, where Samsung Electronics and SK Hynix together account for nearly half of the index weighting, remains about 26% below its record high reached in June. The subdued market response highlights the challenge for President Lee Jae Myung’s Value-Up programme, launched in 2024 to address the so-called Korea discount. South Korean stocks have historically traded at lower valuations than global peers amid concerns over corporate governance, capital allocation and minority shareholder rights. Read more: Global Market | BOJ may speed up rate hikes amid inflation, weak yen risks: Masu South Korean equities have nevertheless been among the world's strongest performers this year, rising about 67% on the back of the AI boom and stronger earnings expectations. Despite the rally, the KOSPI trades at around 4.3 times expected 2027 earnings, compared with about 11 times for the broader Asia-Pacific index, according to Goldman Sachs data cited by Reuters. The valuation gap suggests investors remain unconvinced that the improved shareholder returns announced by the two chipmakers represent a broader shift in corporate behaviour. Samsung payout faces investor scrutiny Samsung’s record shareholder-return plan has been welcomed as a significant step, but investors and analysts have raised concerns over the limited detail surrounding the programme and its reliance on dividends rather than share buybacks. Samsung is distributing around 30 trillion won in cash dividends this quarter as part of an estimated 90 trillion to 110 trillion won shareholder-return programme for 2026. Details of the remaining capital allocation are expected to be finalised in January. The absence of a firm commitment to buy back shares has disappointed some investors, who argue that buybacks could provide a stronger signal that Samsung considers its stock undervalued. Samsung’s ownership structure is also seen as a constraint on potential buybacks. Large-scale repurchases and cancellations could push the stakes held by Samsung Life and Samsung Fire above regulatory ownership limits, potentially requiring them to reduce their holdings below 10%. That could attract greater regulatory scrutiny of Samsung Electronics’ ownership structure and create complications for the controlling family’s stake in the company. Samsung told Reuters that shareholder returns were determined with shareholders at the centre of its decisions. The company also said buybacks were one of several available tools and that its 2026 plan already included substantial cash dividends, while maintaining a policy that combines dividends with share buybacks and cancellations. Will other Korean companies follow? Investors say the long-term success of the Value-Up programme will depend on whether other South Korean companies adopt similar measures. Participation in the initiative remains voluntary, making the response from the wider corporate sector particularly important. There are signs that capital-return activity is increasing. Korea Exchange data shows South Korean companies have announced about 39 trillion won ($29.1 billion) in share buybacks so far this year, already exceeding the combined total for 2024 and 2025. Investors are also becoming more active in challenging corporate decisions they believe disadvantage minority shareholders. Proposals involving unfavourable spin-offs, acquisitions or rights offerings are facing greater scrutiny as investors push companies to improve capital allocation. However, structural concerns remain around board oversight, concentrated ownership, chaebol structures and protections for minority shareholders. For South Korea’s Value-Up programme to deliver a lasting reduction in the Korea discount, investors say companies will need to demonstrate that better capital allocation and shareholder-friendly policies are becoming a sustained corporate practice rather than a temporary response to the current AI-driven earnings boom. The focus is therefore shifting from policy announcements to implementation, Reuters reported. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. 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