South Korea unveiled measures aimed at boosting the country’s stock market. The Korean government announced on Feb. 26. a set of reforms called the “corporate value-up program” to tackle the “Korea discount”, a term used to describe the trend of Korean stocks constantly underperforming compared to global peers.
As early as the second half of this year, 2407 companies listed on Korea’s Kospi and Kosdaq will have the option to analyze and disclose strategies to enhance corporate value voluntarily, the Financial Services Commission (FSC) said. The FSC will provide comprehensive guidelines regarding the principles and methods for such disclosures.
Under this program, listed companies are encouraged to develop and disclose specific strategies tailored to their unique needs to boost corporate value over the medium to long term, spanning three years or more. The FSC’s guidelines serve as recommendations and are not mandatory.
The guidelines include diagnosing the current situation, setting goals, formulating plans, and evaluating implementation. Since the guidelines are not mandatory, the FSC aims to encourage voluntary participation by offering incentives.
The so-called “value-up strategies” made by the companies will be voluntarily disclosed once a year on the respective company’s website and through the Korea Exchange. While a once a year disclosure is the standard, from the second year, each disclosure must include an evaluation of the previous year’s planning and implementation. The FSC will also promote disclosures in English to accommodate foreign investors.
In the corporate governance report, listed companies must provide information on whether they have disclosed their corporate value enhancement plans and further explain their efforts to communicate with investors.
The FSC plans to finalize the guidelines for this program by June, following a seminar in May. “A sufficient review period may be necessary to ensure the plan works,” said the FSC. “There is no strict deadline for the initial disclosure, so companies may disclose the timeline for developing the plan in advance if necessary.”
But the Kospi slipped as the eagerly-awaited proposals fell short of market expectations. Some analysts criticized that the corporate value-up program is “all hype and no substance,” as it lacks compulsory requirements and tax benefits to make the reforms work.
“Share prices of companies with low price-to-book ratios fell as investors disappointed with the corporate value-up program went on a selling spree,” said Lee Jae-won, market analyst at Shinhan Securities.
