Major Korean preferred stocks traded at an average 52.74% discount to their common stock counterparts as of May 13, widening from 37.43% at the end of last year, according to Korea Exchange data. The discount expansion occurred as common stocks rallied on AI semiconductor, robotics, and nuclear power themes, attracting passive fund inflows and foreign buying, while preferred stocks — lacking voting rights and index inclusion — lagged despite higher dividend yields. Market participants now observe a potential shift toward dividend and value stocks following recent market corrections, creating conditions for preferred stock price recovery.
Top 10 Preferred Stocks Show 52.74% Discount Rate as of May 13
Korea Exchange data as of May 13 closing prices showed the top 10 preferred stocks by market capitalization trading at an average 52.74% discount to common stocks, a 15.31 percentage point increase from the end of last year. The top 10 preferred stocks include Samsung Electronics preferred, Hyundai Motor 2nd preferred B, Hyundai Motor preferred, Mirae Asset Securities 2nd preferred B, Doosan preferred, Samsung Electro-Mechanics preferred, Samsung Fire & Marine Insurance preferred, LG Electronics preferred, LG Chem preferred, and Korea Financial Group preferred. The top 20 preferred stocks widened from 38.78% to 52.21% (13.43 percentage points), while the top 30 expanded from 38.34% to 50.68% (12.34 percentage points). All stocks in the top 10 and top 20 categories showed wider discounts, with 29 out of 30 stocks in the top 30 category following the same trend.
The widening discount resulted not from a uniform decline in preferred stock values but from common stocks leading the market rally. Capital flowed into growth-expected sectors including AI semiconductors, robotics, and nuclear power, with exchange-traded fund (ETF) buying demand — including single-stock leveraged products — directed primarily at common stocks. Preferred stocks, lacking voting rights and excluded from major index inclusion despite lower trading volume, failed to match common stock gains even as underlying company fundamentals improved.
Larger market capitalization stocks showed greater discount expansion, supporting this supply-demand structure. Large-cap common stocks received direct benefits from passive capital and foreign buying, while preferred stocks saw limited new capital inflows despite higher dividend yields.
Samsung Electronics Maintains 50% Free Cash Flow Return Policy Through 2026
Samsung Electronics operates a shareholder return policy distributing 50% of free cash flow for 2024-2026 and paying an annual regular dividend of 9.8 trillion won. The company stated it will review additional returns if remaining resources are sufficient. If special dividends materialize as discussed in the market, the dividend yield attractiveness of Samsung Electronics preferred stock — trading at lower prices — could gain relative prominence.
Mirae Asset Securities Announces 300 Billion Won Preferred Stock Buyback
Mirae Asset Securities decided on the 17th of last month to purchase 300 billion won in treasury shares, aiming to reduce market price disparity between common and preferred stocks and achieve balanced shareholder returns. The plan includes 200 billion won for common stock, 10 billion won for 1st preferred stock, and 90 billion won for 2nd preferred stock, with all shares to be canceled. The policy directly reduces preferred stock supply rather than limiting returns to cash dividends. If this approach spreads to other listed companies, it could accelerate structural discount reduction for large-cap preferred stocks.
FAQ
What caused the Korean preferred stock discount rate to widen to 52.74% as of May 13?
The discount widened because common stocks led the market rally driven by AI semiconductor, robotics, and nuclear power themes, attracting passive fund inflows and foreign buying, while preferred stocks — lacking voting rights and index inclusion — lagged despite higher dividend yields.
What shareholder return policy does Samsung Electronics operate through 2026?
Samsung Electronics distributes 50% of free cash flow for 2024-2026 and pays an annual regular dividend of 9.8 trillion won, with a stated policy to review additional returns if remaining resources are sufficient.
What treasury share buyback did Mirae Asset Securities announce?
Mirae Asset Securities decided on the 17th of last month to purchase 300 billion won in treasury shares (200 billion won for common stock, 10 billion won for 1st preferred stock, 90 billion won for 2nd preferred stock), with all shares to be canceled to reduce market price disparity and achieve balanced shareholder returns.
