In a bid to address the persistent undervaluation of its stock markets, South Korea’s Financial Services Commission has unveiled the “Corporate Value-up Program.” This initiative prioritizes shareholder returns through various incentives, including tax benefits, while encouraging listed companies to disclose plans for enhancing valuations.
Analysts often refer to South Korea’s undervaluation as the “Korea discount.” To combat this, the program draws inspiration from Japan’s successful strategies, particularly seen in Tokyo’s record-breaking market performance.
Japan’s Nikkei 225 index has surged above 39,000 points, buoyed by robust earnings and corporate governance reforms aimed at maximizing shareholder returns. Following suit, South Korea will introduce the “Korea Value-up Index” for institutional investors, resembling Japan’s JPX Prime 150, which highlights high-performing companies.
Additionally, the Financial Services Commission plans to list Exchange-Traded Funds (ETFs) tracking the Korea Value-up Index, facilitating retail investors’ access to promising investment opportunities.
With these measures, South Korea aims to bridge the valuation gap and instill confidence in its stock markets’ potential for growth and resilience.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
February 26th, 2024
