SEOUL, Apr 14 (Reuters) South Korean shares rose more than 1.7 percent to a record high on Friday, led by Samsung Electronics as its stock buyback plan offset lacklustre quarterly earnings, and amid investor optimism about a recovery in profits at exporters in the second half.
Anticipation of a share buyback lifted POSCO Co. Ltd. to its second record in two days, as the world's fifth-biggest steel maker by output seeks to defend itself from possible hostile takeovers at a time of consolidation in the global steel sector.
The benchmark Korea Composite Stock Price Index (KOSPI) <.hit a record 1,430.11 before easing slightly. The index was up 1.7 percent at 1,429.34 at 0356 GMT.
The index is up 3.6 percent so far in 2006.
Samsung Electronics, the world's biggest maker of memory chips, said earlier it would buy back 1.66 trillion won ($1.73 billion) worth of common shares by July 17 and preferred shares worth 199.4 billion won.
The announcement blunted the impact of a bigger-than-expected 25 percent drop in first-quarter operating profit, as the chip maker was hit by sliding margins in mobile phones and memory chips.
Samsung's shares rose 3.3 percent to 659,000 won.
''The second quarter will be so-so, but earnings from the second half are expected to get better on improvements in display and chip divisions,'' said Kim Seong-ki, chief investment officer at SH Investment Trust Management.
Hynix Semiconductor Inc. gained 3.2 percent to 32,100 won.
Its bigger rival, Samsung, said it expected NAND demand to improve in the second quarter after the price declines, and that it expected a ''balanced'' outlook for supply and demand of DRAM memory in 2006.
Other exporters also gained due to expectations that earnings in the second half would grow with a more stable won and that an improving global economy would bolster demand.
''Investors are seeing expectations for weak first-half earnings as fully priced in. The won may have hit bottom, so earnings at exporters could improve,'' said Kim Jeong-hwan, a strategist at Woori Investment and Securities.
Kia Motors Corp., the country's second-biggest auto maker, rose 1.96 percent to 20,850 won.
POSCO rose 3.27 percent to a record 268,500 won after Chief Executive Lee Ku-taek said on Thursday the best way to fend off potential hostile bids was through a 20 percent increase in its share price. That raised speculation POSCO would buy back its stock.
South Korea's National Agricultural Cooperative Federation said it may buy up to about $200 million worth of shares in POSCO, amid market talk the steel maker is also seeking to attract friendly shareholders as another layer of defence.
Banks gained, recovering from recent falls, with investors optimistic about solid first-quarter earnings and amid hopes a consolidation in the sector may further push up share prices.
Kookmin Bank, the country's biggest lender, rose 2.56 percent to 84,000 won.
($1=961.8 won) REUTERS PV RAI1058