Lee Jae-myung vows dividend boost, transparency in capital market

President Lee Jae-myung (right, top) speaks during a meeting with representatives of the Korea Exchange at its headquarters in Seoul on Wednesday. (Pool photo via Yonhap)

President Lee Jae-myung on Wednesday pledged to map out various incentives for listed companies on South Korean stock markets to pay out more dividends, saying the stock market could play a key role in boosting the national economy.

“In other countries, people buy blue-chip stocks and use the dividends paid from them to supplement their living expenses, which boosts domestic consumption and contributes to a virtuous cycle in the economy, but (companies in) our country are not willing to pay dividends,” said Lee during a meeting with representatives of the Korea Exchange, South Korea’s main stock market operator, which is also tasked with market oversight.

President Lee also said South Korean stocks tend to lag behind in dividend payments compared to other countries such as China.

“There must be various reasons for that. So we are preparing for tax code reforms and policy improvements to boost dividends,” Lee said.

“If equities become an alternative destination that people find as attractive as real estate, then by allowing people to get more dividends and make money to cover living costs, companies will find it easier to attract capital, and a virtuous cycle will be created,” he also said.

The remarks came as South Korea’s stock market hit a three-year high, extending a winning streak that started with his inauguration the previous week.

Lee, who took office on June 4, also said restoring transparency in South Korea’s capital market was his priority.

Meeting the KRX representatives, including 55 rank-and-file employees of the bourse operator, Lee stressed the need for stronger market monitoring to tackle unfair trading practices — namely, insider trading, market manipulation and market disruption.

“At the core of a capitalist economy lies the stock market,” Lee said. “The most important task is to resolve, or at least alleviate, the unfairness and opacity of the stock market.”

Later in the afternoon, Lee’s spokesperson elaborated on the president’s remarks that the government would respond firmly to unfair trading by implementing a “one strike, you’re out” policy for acts such as stock manipulation. The government would seek measures to recover illicit gains through fines equal to the profits obtained,” his spokesperson Kang Yu-jung told reporters.

During his presidential election campaign, Lee pledged to improve market liquidity for stock investors and come up with measures to better distribute profits to shareholders.

Lee, the former leader of what was then the main opposition party, has also called for a legal revision to require boardrooms at South Korean companies to fulfill their fiduciary duty not only to their companies but also to their shareholders.

The Kospi — South Korea’s benchmark stock index — hit its highest point in about three years and five months, continuing its winning streak for a fifth consecutive trading day since Lee’s inauguration on June 4. The market did not operate on Friday due to the observance of National Memorial Day.

At 3 p.m. Wednesday, the Kospi stood at 2,903.10 points, up more than 1 percent from the previous day’s close. Over the first week of Lee’s presidency, the index had risen nearly 8 percent.

Foreign investor net inflows also continued for the past five trading days, including net purchases of 93.2 billion won ($68 million) on Wednesday as of around 3 p.m.

consnow@heraldcorp.com