South Korean public companies offer strong growth potential with the country’s major stock market index, the Korea Composite Stock Price Index (KOSPI), trading at a discount compared to regional and global competitors. To address the so-called ‘Korea Discount’ and unlock the index’s potential, South Korea’s Financial Services Commission launched the ‘Corporate Value-Up Program’, which aims to improve corporate returns by enhancing stakeholder value, revising dividend and inheritance taxes, and strengthening corporate governance.26
“Based on price-to-earnings ratio, the KOSPI trades at about a 40 per cent discount when compared to regional and global comparative indices,” says Hwang. Reforms, set to roll out gradually, are expected to make K-equities more attractive to institutional investors.
Sectors such as automotive and banking are tipped to be key beneficiaries. Auto manufacturers with strong cash flows may offer dividends, while lenders with robust financials and shareholder-friendly policies present attractive investment openings.27 As changes take hold, new opportunities are likely to emerge. “How the program unfolds in the coming year or so will define its success,” adds Hwang.
Meanwhile, private equity has been trending upwards. As of 2023, there are over 1,100 funds registered in South Korea, managing a total equity of KRW136 trillion ($US10 trillion).28 Private equity firms are targeting high-growth sectors and seeking to support companies in realising their full potential.
With a wealth of opportunities being created by South Korea across multiple sectors, both established and emerging, Kim noted: “There’s a huge amount of opportunity on the horizon here. South Korea is an open and resilient market, and is already making a significant contribution globally. With government plans to expand the country’s inherent dynamism, we see potential for investors in a number of areas.”