Samsung's Buybacks Won't Rescue the Won

The Won’s Uncomfortable Dependency

South Korea’s currency has become strangely tethered to the corporate balance sheets of two companies. The won recently fell from 1,550 against the dollar in early July to around 1,385 — a swing of 170 won that would normally require a major macro event. What actually drove it was not a central bank intervention or a shift in U.S. monetary policy. It was SK Hynix selling American depositary receipts.

The mechanics are straightforward enough. SK Hynix raised roughly $26.5 billion through its ADR listing and converted the proceeds into won at a pace of about $1 billion per day, according to Sasang In Securities. That influx of dollar supply into the Korean market pushed the won higher. Samsung Electronics is now following a similar path with its own shareholder return program, buying back shares using dollar-denominated reserves and converting them to won in the process.

The market narrative that has emerged is almost too clean: two tech giants convert dollars to won, the won strengthens, crisis averted. But that narrative collapses the moment you look beyond the buyback orders.

Who Actually Owns the Stocks Being Bought Back

The critical missing piece in the won-boost story is that a significant portion of Samsung and SK Hynix shares are held by foreign investors. When those companies announce buybacks and pay dividends, the won-denominated payments flow out the moment foreign shareholders convert their proceeds back into dollars. That reversal happens on the same foreign exchange desk where the buyback-driven won demand arrived.

Consider the math. If Samsung converts $1 billion in reserves to buy back shares at an average price, and a substantial fraction of those shares sit in foreign portfolios, the resulting dividend and capital gain repatriation will create a corresponding dollar demand. The net effect on the won could be near zero. It is not negative — the buyback still removes shares from the market and supports earnings per share — but it is not the one-way currency bet that some traders are pricing in.

There is also a subtler feedback loop here. Foreign investors who benefit from the buyback-induced price appreciation may choose to hold their positions longer, delaying the very repatriation that would unwind the won’s gains. But this hold pattern is fragile. Any shift in risk sentiment — a spike in U.S. yields, a slowdown in global chip demand — can trigger simultaneous selling across Korean large-caps, and when that happens, the won faces the exact opposite pressure that the buyback narrative assumed away.

The Real Source of the Recent Won Strength

The recent 170-won move deserves more scrutiny than it is getting. SK Hynix’s ADR listing was the dominant factor. The company raised dollars on U.S. markets and brought them home. That is a capital account transaction, not a trade surplus. It is temporary by nature — you can issue ADRs once, maybe twice, not every quarter. The dollar supply that hit the Korean market from that single event is already largely absorbed.

Samsung’s buyback program is real and ongoing, but it is a different beast. Share buybacks fund themselves from existing cash reserves or debt issuance, not from fresh foreign capital raising. The won-strengthening effect comes from converting dollars that Samsung already holds overseas. That is a one-time stock adjustment, not a flow. Once those reserves are converted, the pipeline empties.

What makes this particularly precarious is that Samsung’s overseas dollar reserves, while large, are not infinite. The company has been accumulating them precisely because the won’s long-term weakness made domestic investment less attractive. Converting them now to support the currency is effectively using a structural hedge against won depreciation to fight won depreciation — a circular maneuver that provides relief but not resolution. And unlike the ADR route, there is no secondary market or repeat issuance to fall back on if the won comes under renewed pressure.

The Second-Order Effects No One Is Discussing

Beyond the immediate currency dynamics, this arrangement is distorting capital allocation across the broader economy. When two giants absorb the lion’s share of foreign capital attention and convert dollars at scale, smaller exporters and mid-cap firms find themselves competing for the same FX liquidity on less favorable terms. The won’s artificial lift from buyback conversions raises the cost of hedging for the rest of the corporate sector, effectively subsidizing Samsung and SK Hynix at the expense of everyone else.

There is also a pension and institutional angle. Korean domestic institutions — including the National Pension Service, which holds enormous positions in both companies — are now indirectly funding won-strengthening operations. When Samsung converts dollars and buys back its own shares, the NPS benefits from the elevated stock price even as the won’s strength erodes the dollar value of its overseas holdings. It is a transfer of wealth from international portfolio diversification toward concentrated domestic equity support, and it raises questions about whether pension mandates are being reshaped by corporate treasury strategy.

The Bank of Korea is watching closely but appears reluctant to intervene directly. With interest rates already elevated relative to the U.S., further tightening to support the won would risk stifling an economy that has barely escaped stagnation. Loose talk of FX swap deployments floats through market rumor channels, but concrete action has been thin. The result is a de facto delegation of currency management to corporate balance sheets — an arrangement that works until it does not.

Why This Matters Beyond Seoul

What is unusual about this moment is how much of Korea’s currency stability now depends on the capital allocation decisions of two corporations. That is not how macro resilience is supposed to work. A strong currency should rest on trade balances, foreign investment inflows, interest rate differentials, and central bank credibility — not on whether Samsung decides to retire shares this quarter.

The dependency reveals a structural weakness. Korea runs persistent current account surpluses, yes, but those surpluses have been volatile. The trade balance swings with semiconductor cycles, and semiconductor cycles are brutal. When memory chip prices fall, the surplus shrinks. When it shrinks, the won weakens. So the government and the market have been looking for alternative anchors, and what they found was that Samsung and SK Hynix sit on enormous dollar hoards that could be converted on demand.

That is a creative solution until it is not. The semiconductor cycle turned downward in late 2024 and early 2025, dragging Korea’s current account from surplus to near balance. The won tested levels that would have been unthinkable just two years prior. Corporate buybacks provided a floor, but floors are not foundations. The moment semiconductor prices recover and the current account re-expands, the narrative will flip again — this time arguing that a stronger won is unnecessary because trade flows will do the work. But by then, the dependency will already be baked into market expectations.

What Happens Next

The won is unlikely to break below 1,350 purely from buyback activity, but the upside is similarly capped. The ADR-driven dollar supply from SK Hynix has faded. Samsung’s buybacks will continue to generate periodic won demand, but foreign outflows from dividends and portfolio rebalancing will offset much of it. The net directional impact on the exchange rate is small.

The more interesting question is what Samsung and SK Hynix do if the won continues to strengthen on its own — through trade data, through Fed policy shifts, through geopolitical noise. A stronger won hurts their export competitiveness and makes their dollar-denominated earnings worth less in local currency. Both companies have every incentive to keep converting dollars to won as long as the exchange rate stays favorable. That creates a feedback loop: buybacks strengthen the won, which triggers more buyback-driven conversions, which strengthens the won further, until something breaks the cycle.

It will not be a policy decision that breaks it. It will be a moment when Samsung’s dollar reserves run thin or when foreign shareholders decide to sell rather than receive dividends in won. It could also be a sharper-than-expected move by the Federal Reserve that redraws yield differentials overnight, making the won’s artificial support suddenly look expensive. Until then, the won will orbit around these two companies’ balance sheets, and Korea’s currency stability will remain an awkward conversation about corporate treasuries instead of macro fundamentals. The dependency is real, the mechanics are transparent, and the ending — whenever it arrives — will force a reckoning that neither Samsung, SK Hynix, nor the central bank is prepared to have.