In 2024, excitement over the Value-up programme gave way to pessimism as President Yoon’s unpopularity meant nothing got done. Many of the listed stocks which should have benefited from Value-up – namely, those where corporate governance or capital allocation concerns were depressing the share price – rallied sharply but then fell back later in the year, in many cases to below preannouncement levels.
When President Lee replaced President Yoon, “KOSPI 5000” took over as the banner for a new collection of reform measures. And similar to 2024, the initial announcement drove a huge rally in the affected names, but by the end of the year, the market’s attention had drifted elsewhere and many of the same names had fallen sharply back.
Current levels only make sense if Korea reforms are getting derailed a second time, and so far, the evidence doesn’t point that way. The main difference with 2024 is that President Lee has a strong mandate to get things done, and he has so far shown an admirable focus on following through with his campaign promises. Two revisions of the Commercial Act have been passed, and a third is on the way. Corporates have responded by increasing share buybacks and cancellations while publishing plans to improve shareholder value creation. Investors have correspondingly reacted by using the reforms as a platform to mount campaigns targeting poor governance and inefficient capital allocation. Given the political willpower plus strong buy-in by multiple capital market participants, the reform momentum looks set to continue for the foreseeable future.