Seoul, South Korea – South Korea’s benchmark KOSPI index continues its upward trajectory, nearing the 6,000 mark despite global economic uncertainties and newly announced US tariffs. The index’s resilience is being attributed, in part, to the recent passage of a revised corporate law aimed at boosting shareholder value, specifically through mandatory stock buybacks. Investor sentiment remains bullish, with several securities firms raising their KOSPI targets, some even predicting a surge to 8,000 points in the coming months.
The KOSPI’s performance comes amidst growing concerns over potential trade disruptions following the announcement of a 15% tariff on all goods imported from the United States. However, the South Korean market appears to be largely absorbing the news, fueled by strong performance in the semiconductor sector and anticipation of the benefits stemming from the recently approved third amendment to the Commercial Act. This amendment, which mandates the buyback and cancellation of newly acquired company shares, is expected to enhance shareholder returns and bolster market confidence.
Third Commercial Act Amendment Passes Law Committee
On February 23, 2026, the National Assembly’s Legal and Judiciary Committee approved the third amendment to the Commercial Act, a key piece of legislation championed by the ruling party. According to Newsis, the amendment passed with 11 votes in favor and 6 against, with the opposition party largely voting against the measure. The core of the amendment centers around requiring companies to dispose of newly acquired treasury stock within one year of purchase. Existing treasury stock will have a six-month grace period, requiring disposal within a total of 18 months after the law’s enactment.
However, the legislation includes exceptions for companies in sectors with foreign ownership limits – including public broadcasting, telecommunications, and defense – allowing them up to three years to dispose of shares. Exceptions are too made for companies acquiring shares for legitimate business purposes, such as employee stock ownership plans, but these companies will be required to submit annual shareholder approval for their stock retention plans. The amendment also stipulates that any share buybacks or disposals must be distributed equitably among shareholders based on their existing holdings, and that treasury shares will not carry voting or preemptive rights.
Market Response and Analyst Outlook
Despite the initial shock of the US tariff announcement, the KOSPI demonstrated remarkable strength, rising 0.65% to close at 5,846 points on February 23, 2026 – marking its third consecutive day of record highs. News1 reported that individual investors led the buying spree, injecting over 1 trillion won into the market. This influx of capital helped offset profit-taking and maintain the upward momentum.
Leading companies like Samsung Electronics and SK Hynix contributed significantly to the rally. Samsung Electronics saw a 1.5% increase, reaching a new all-time high, while SK Hynix briefly touched 980,000 won per share during intraday trading. The strong performance of these semiconductor giants reflects ongoing optimism about their earnings potential.
Several securities firms have revised their KOSPI targets upwards in response to the positive market sentiment and the anticipated impact of the new commercial law. While some firms have raised their targets to 7,000 points, one foreign brokerage has gone even further, predicting the KOSPI could reach 8,000 points by the first half of 2026. This optimistic outlook is based on the expectation of continued strength in the semiconductor sector and the positive effects of the shareholder-friendly reforms.
Expert Commentary on Market Volatility
Despite the overall positive trend, analysts caution that market volatility may persist in the short term. Park Sang-hyun, a researcher at iM Securities, noted that the rapid ascent of the KOSPI to nearly 6,000 points could trigger some profit-taking. Seo Sang-young, a managing director at Mirae Asset Securities, highlighted the uncertainty surrounding the US tariffs as a potential source of market fluctuations. “The issue of trade disputes creates uncertainty, which could lead to some profit-taking,” Seo explained, adding that volatility is likely to remain elevated.
Implications of the Share Buyback Mandate
The mandatory share buyback provision within the third amendment to the Commercial Act is designed to address concerns about excessive corporate cash holdings and to encourage companies to return capital to shareholders. By reducing the number of outstanding shares, buybacks can increase earnings per share and potentially drive up stock prices. This move is particularly appealing to individual investors who have long advocated for greater shareholder value.
The legislation aims to address a long-standing issue in the South Korean market, where companies have often been criticized for hoarding cash rather than investing in growth or distributing it to shareholders. The new law is expected to incentivize companies to adopt more shareholder-friendly policies and to improve corporate governance practices. The implementation of the law is expected to be closely monitored by investors and regulators alike.
The passage of this amendment follows a push from President Lee Jae-myung, who met with the Democratic Party’s “KOSPI 5000 Special Committee” on January 22, 2026, urging them to expedite the passage of the legislation. According to the Segye Times, the President emphasized the importance of strengthening the foundations of the capital market and fostering a more favorable investment environment.
While the amendment has been largely welcomed by investors, some concerns have been raised about its potential impact on corporate investment. Critics argue that mandatory buybacks could reduce the funds available for research and development or capital expenditures. However, proponents maintain that the benefits of increased shareholder value outweigh these potential drawbacks.
The South Korean government and financial regulators are closely monitoring the market’s response to the new law and are prepared to take further steps to ensure its effective implementation. The focus remains on fostering a stable and sustainable capital market that benefits both investors and companies.
Key Takeaways:
- The KOSPI index is nearing the 6,000 mark despite global economic headwinds.
- The third amendment to the Commercial Act, mandating share buybacks, has been approved by the National Assembly.
- Securities firms are raising their KOSPI targets, with some predicting a surge to 8,000 points.
- Market volatility is expected to persist due to ongoing trade tensions and profit-taking.
Investors will be closely watching for further developments regarding the implementation of the third Commercial Act amendment and the evolving global economic landscape. The next key event to watch will be the release of corporate earnings reports in the coming weeks, which will provide further insights into the health of the South Korean economy and the impact of the new legislation.
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