[Anchor]
The South Korean stock market plummeted as U.S. Treasury yields, long considered a safe-haven asset, surged. After the regular market closed, SK Hynix announced plans to buy back and retire a record-shattering 40 trillion won worth of treasury shares, drawing keen attention to how it will impact the market.
Reporter Kim Hye-min has the details.
[Reporter]
The primary reason behind the KOSPI plunging by 5.8% to break below the 6,500 mark is cited as the sharp spike in U.S. Treasury yields.
The yield on the U.S. 10-year Treasury note soared to 4.72%, and the 30-year bond yield jumped to 5.3%.
In particular, the 30-year Treasury yield reached its highest level since 2007.
As the U.S. fiscal deficit remains severe and the issuance of government bonds continues, investors are demanding higher yields.
Currently, the U.S. national debt is approaching 40 trillion dollars.
In addition, U.S. big tech companies like Amazon issued 194 billion dollars worth of corporate bonds, which is 79% more than last year, further pushing up treasury yields.
[Jang Bo-sung / Head of Macroeconomic and Financial Research, Korea Capital Market Institute : As big tech companies issued corporate bonds with maturities exceeding 15 years, demand for U.S. government bonds was substituted with demand for corporate bonds, which also drove up U.S. Treasury yields.]
Concerns that rising interest rates would immediately translate into heavier investment cost burdens sent shockwaves through the South Korean stock market as well.
Foreign investors net sold 3.5 trillion won, causing Samsung Electronics to tumble by 7.8% and SK Hynix by 9.7%.
While concerns linger that treasury yields could enter a trend of sustained increases, there are also expectations that large-scale shareholder return policies by domestic semiconductor companies could serve as a catalyst for a rebound.
After the regular trading session closed, Hynix publicly disclosed plans to acquire and retire 40 trillion won worth of treasury shares, the largest scale ever among domestic listed companies.
The company also announced that it will return more than 50% of its cumulative free cash flow over the next three years to shareholders, including expanded dividends.
Following the disclosure, SK Hynix shares recovered most of their losses in after-hours trading on the alternative trading system.
[Park Seok-hyun / Researcher, Woori Bank : How much of a rebound can be achieved will likely serve as an initial test, and we will have to see how Hynix shares react in the main session tomorrow.]
Expectations are also rising that Samsung Electronics could announce its shareholder return policies as early as this month, meaning the broader South Korean KOSPI, heavily weighted toward these two semiconductor giants, is expected to be significantly impacted.
(Photo courtesy of Kim Hak-mo | Video Editing by Kim Jun-hee | Design by Kim Min-young)
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