The record-breaking shareholder return schemes unveiled by South Korea's two leading semiconductor manufacturers have emerged as a pivotal factor influencing the won's valuation. Should these corporate titans tap into the local currency market to finance their dividend distributions, the recent upward trajectory of the Korean won is poised to gain further momentum.

Buoyed by the announcement from Samsung Electronics of a shareholder return program worth up to 110 trillion won ($79 billion), the won strengthened on Friday, surging as much as 1% to 1,380.35 per dollar. This follows rival SK Hynix's earlier declaration of a 40 trillion won share buyback initiative and a commitment to channel a larger share of profits back to its investors.

This development arrives on the heels of a substantial appreciation of the won since early July, marking its fastest 40-day gain since late 2022. This week, the currency also breached the psychologically significant 1,400 won-per-dollar threshold for the first time in over ten months. Market attention is now zeroed in on the volume of won demand these buybacks will generate and the ultimate scale of funds that foreign shareholders will repatriate overseas.

"These companies are required to pay out in won; they can either utilize their existing won reserves or sell dollars in other markets to acquire the currency," noted Choi Kyuho, an economist at Hanwha Investment & Securities. "Given the enormous sums involved, they may ultimately be compelled to offload more dollars to raise the necessary capital."

While these payout plans have provided an initial lift to the won, their durability as a sustained catalyst remains uncertain. Analysts point out that it is not yet clear whether the chipmakers will draw upon existing cash reserves or finance the payouts by converting their dollar holdings into won. Citigroup estimates that if foreign equity investors were to repatriate their funds, roughly half of the shareholder return proceeds could be converted back into dollars. According to data from the Korea Exchange as of August 20, foreign ownership stands at 50.1% for SK Hynix and 46.9% for Samsung.

Nevertheless, Kim Jin-Wook, chief economist at Citigroup Korea, argued in a report that these distribution plans should have a net positive impact on the won, as corporations will need to convert a greater portion of their export earnings into the local currency. He added that robust export performance, dollar financing activities, and proactive conversion and hedging behavior within the private sector are all contributing factors supporting the won's appreciation.