Several positive developments in the corporate reform space occurred in January:

1. Hanwha Corp., the apex of the Hanwha conglomerate, became the second major listed holding company in Korea to outline plans for reducing its share price discount to NAV, which currently stands at 63% on the company’s numbers.
   In this respect it is following the lead of SK Square, which is the current “gold standard” among holding companies from a corporate governance perspective.
   Hanwha’s approach is different to SK’s. While SK aims to reduce its discount via management incentives, Hanwha Corp. will focus on reducing the number of listed subsidiaries. According to Hanwha’s analysis, holdcos with fewer parts trade at smaller NAV discounts. Hanwha’s announcement is significant because it is now harder for other holding companies to explain why they’re not doing something similar.
   To that end, Metrica last week initiated engagement campaigns against two new targets, valued at 0.22x and 0.25x NAV by the market.
2. On 22nd January, President Lee reiterated his support for the ”Stock Price Suppression Prevention Act” and instructed his chief policy officer to work on immediate implementation. We first wrote about this bill in May 2025. It seeks to prevent majority owners reducing inheritance taxes by driving down share prices ahead of succession events. The bill would treat listed companies the same as unlisted companies, setting a valuation floor of 0.8x NAV.
   Naturally, this bill will encounter opposition from the conglomerates, but President Lee already has a track record of pushing through reform-oriented legislation, so we are optimistic about the prospects for this bill, which will have a meaningful impact on the valuations of affected names.
3. Also on the 22nd, President Lee highlighted the issue of duplicate listings. This refers to chaebols creating multiple layers of subsidiaries to solidify control while depressing share prices to save on inheritance tax.
   Duplicate listings are bad for minority investors and most stock exchanges globally are against them. They are however prevalent in Korea (18% of the market) for historical reasons. Japan used to be in a similar position but now only has 4% thanks to Tokyo Stock Exchange initiatives.
   We wrote about this issue in April 2025, when the Korea Exchange blocked SK Innovation’s spin-out of its subsidiary SK Enmove. Now the president himself is calling out conglomerates such as LS and LG for spinning off subsidiaries against the interests of minority shareholders.
   LS has been shamed into withdrawing its plans, and it seems that spin-off IPOs by other conglomerates are also on ice. The next catalyst for this trade will be when the KRX releases newguidelines in Q1, with a corresponding Capital Markets Act revision to come. Metrica expects this to generate further trading opportunities in this space.

Sources:

President Lee Pushes Act to Curb Tax-Driven Stock Price Suppression, The Chosun Daily, 28 January 2026,

Will Dual Listings, the ‘KOSPI 5000 Obstacle,’ Disappear?, The Asia Business Daily, 26 Jan 2026

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.

We recently participated in a panel discussing corporate reform focusing on Japan and South Korea. As evidenced by the strong turn-out, interest in this topic is very high. In general, the panel was optimistic on the prospect of Korea corporate reform eventually replicating the success of Japan. While the Korean market naturally has its own long-standing and wellknown structural challenges – deriving mainly from the dominance of founding families – the significant rise in retail ownership in recent years should continue to incentivise politicians to push ahead with reforms even when faced with fierce resistance from entrenched interests.

In this context, both “carrots” and “sticks” are critical to the long-term success of the reform programme.

President Lee has achieved admirable progress with the “sticks”. The expansion of directors’ fiduciary duties and implementation of cumulative voting should go a long way to limit the recurrence of the bad behaviour seen in recent years, as will the upcoming treasury share cancellation proposals when enacted. On the “carrot” side, the upcoming dividend taxation changes are important, as they should encourage companies to raise payout ratios, making stocks more attractive to domestic retail investors when compared to alternatives such as real estate.

However, more is needed if Korea is to make progress similar to Japan:

1. We need to see reforms to the inheritance tax system, which currently incentivises major shareholders to drive down share prices around succession events. A tax rate reduction would be helpful, but even better would be taxation of assets on fair value instead of an artificially depressed market price. The “0.8x proposal” mentioned in our May newsletter could be an ideal solution. We look forward to seeing the government’s inheritance tax reform roadmap early next year.
2. We would like to see more engagement by the stock exchange. In our recent discussion, one panellist said that Mr. Yamaji (Group CEO of Japan Exchange Group) was “the greatest activist investor in Japan”, and we share that sentiment. For its part, the Korea Exchange (KRX) has made good progress with promoting the 2024 Corporate Value-up programme via seminars,  website disclosures and custom indexes etc. Nevertheless, the take-up rate among listed corporates still remains rather low at only 7%7. Korea needs something similar to Japan’s “Management that is Conscious of Cost of Capital and Stock Price” policy, i.e. whereby companies that have not submitted Value-up plans have to explain themselves annually. We attended a seminar by Mr. Jeong of the KRX recently and came away optimistic that he will develop further ways to advance the reform programme within the Korean context.
3. Finally, investors must play their part in advancing all aspects of the reform agenda. While Korean shareholder activism has greatly increased in the last two years, much of this has been focused on governance items such as board appointments. What is also needed are more Japan-style campaigns focusing on capital allocations and balance sheet efficiency. While there has been some activity along these lines in 2025, we expect further developments in 2026. In particular, we are closely monitoring the current selection process for the next head of the National Pension Service, as the appointment of a reform-minded candidate would be a very significant positive.

The good news is that valuations in names affected by corporate governance reform in Korea are still very attractive even after the market’s impressive run in 2025, and although the path to success may not be a straight line, we ultimately expect significant return potential from the fund’s positions in this space.

In Korea, it was good to see the second set of amendments to the Commercial Act passed on 25 August. Listed companies with assets exceeding two trillion won will now have to adopt cumulative voting, making it dramatically easier for minority shareholders to get at least one candidate onto the board.

The next set of amendments to the Commercial Act, scheduled for later this year, will include the mandatory cancellation of treasury shares.

Treasury shares have been a focus topic in the Korean market since Lee Jae Myung initiated his presidential campaign, with a basket of treasury share-heavy holding companies beating the index by around 25% at one point (figure below).

Performance of a basket of holding companies with large treasury share holdings, May 2025 to present

The reason is that, in the past, treasury shares have often been misused to defend management rights against hostile takeovers or shareholder activism. Consequently, the ruling Democratic Party of Korea is proposing that companies must cancel their treasury shares within a certain timeframe, which has not been determined yet but is likely to be immediate to one year for newly-acquired treasury shares, and six months to five years for existing holdings.

Korea’s business community has inevitably voiced strong opposition to these measures, arguing that treasury shares are a strategic tool for defending management control, such that rapidly cancelling decades’ worth of accumulated shares would be not only impractical but would also leave companies exposed to foreign hostile takeovers.

Given the progress made to date on other reform measures, Metrica is reasonably confident that the government will be able to push through the treasury share cancellation bill with timeframes on the shorter end. This will improve transparency in the market and reduce the ability of companies to use treasury shares for illegitimate purposes.

Some companies have already been ramping up cancellations (figure below), spurred by the “Value-up” initiatives of former President Yoon and an increased focus on corporate governance by domestic investors.

Treasury share cancellation announcements by listed firms in South Korea

Korea’s President Lee is a month into his term, and so far he has remained admirably focused on promoting the “KOSPI 5000” agenda.

A long-awaited bill to reform the Commercial Act just passed the National Assembly as this newsletter went to print, and it includes provisions expanding the duty of care of corporate directors from “companies” to “companies and shareholders”, mandating electronic general shareholder meetings for large companies and limiting the voting rights of shareholders and related parties to 3% when electing audit committee members.

By implementing these reforms, the government is acting against the express wishes of the chaebols, who have campaigned loudly against them. It is strong evidence that the incoming administration is able to get things done. It also reflects recognition that, with almost a third of Korean people having brokerage accounts, anyone threatening to derail the stock market’s 30% year-to-date rally would be playing a dangerous game.

Taxes are another area of focus. Following the discussions on inheritance tax changes for listed shares – outlined in last month’s newsletter – the government is turning its attention to dividends.

Currently, all financial income including dividend income is taxed at 15.4% below KRW 20 million, and at progressive rates of up to 49.5% above KRW 20 million. The National Planning Committee and Ministry of Economy and Finance are considering eliminating the progressive rate schedule so that everything is taxed at 15.4%.

Historically, chaebols have been reluctant to pay anything more than nominal dividends to their owners due to the high tax burden. If President Lee’s dividend tax reform goes ahead, it should encourage operating subsidiaries to raise payouts, which would be positive for the valuations of the listed holding companies that own them.

It is proving to be a very busy year for Asia-Pacific M&A, with the number of deals on track to exceed 300, comfortably exceeding the previous peak of 242 (figure below). Hong Kong, Singapore and Japan have shown the greatest leaps in activity, with run rates of 3.5x, 3.0x and 2.1x the post-2009 average, respectively.

Announced M&A deals with target listed in Asia-Pacific, 2009 to present

Japan remains an area of particular interest. This year’s surge in dealmaking seems mostly driven by two Tokyo Stock Exchange initiatives:

1. In February the exchange published a presentation containing views sharply critical of listed parent-subsidiary structures8. Since then at least $50 billion of clean-up transactions have been announced, including NTT / NTT Data, Toyota Industries / Toyota Motor, KDDI / Kyocera and Aeon / Aeon Mall. Japan still has more than 200 listed subsidiaries9 so there is plenty more to be done on this front.
2. Next month the exchange will significantly tighten protections for minority investors in going-private deals10. A broader range of deals will now be caught by the requirement to obtain a special committee (SC) opinion. The SC will now have to consider whether any increase in corporate value will be fairly distributed to minority shareholders. The new rules also require greater transparency for any valuations performed in the analysis.

Some acquirers are clearly taking advantage of the rush to get deals done at very low prices, and a number of these situations offer interesting optionality, according to Metrica’s analysis.

The result of the Korean presidential election came in just as this newsletter went to press. Metrica was pleased to see Lee Jae-myung win the race by a comfortable margin. Mr. Lee’s campaign platform included a large number of pledges to improve Korea’s corporate governance and stock market functioning, including:

• Improving corporate governance transparency
• Revising the commercial act to expand corporate directors’ fiduciary duties beyond the company to include shareholders
• Ensuring that cumulative voting cannot be excluded by the articles of incorporation
• Ensuring that new shares are allocated to existing parent company shareholders (including minority shareholders) in the event of a split-off listing
• Implementing policies which institutionalise the mandatory cancellation of treasury stocks by listed companies, ensuring these shares are returned to shareholders as a benefit
• Setting a mandatory independent director ratio for companies of a certain scale, ensuring certain level of independent oversight
• Gradually expanding the separate election of audit committee members for large listed companies
• Implementing electronic voting for large listed companies
• Introducing of advisory shareholder proposals
• Implementing fair price framework that considers stock prices, asset values, and revenue values when determining the acquisition or merger prices for publicly listed companies
• Implementing mandatory public purchases to share management control premiums and guarantee opportunities for minority shareholders to redeem their shares during company acquisitions
• Implementing system allowing minority shareholders to request an examiner through the courts when merging publicly listed companies and their affiliates
• Strengthening monitoring and sanctions against unfair internal transactions Importantly, Korea finally has a president and majority government from the same party. For the first time in three years, the government will be able to progress its legislative agenda without being constantly hindered by an uncooperative veto-holder.

A bill submitted by Korea’s ruling Democratic Progressive Party with the firm support of the incoming president could have a significant impact on the valuations of certain listed companies.

It seeks to remove the incentive for major shareholders deliberately to depress their companies’ share prices around succession events.

Currently, inheritance tax for listed companies is calculated using a four-month average of the share price around the time of the transfer. This has led to companies conducting deeply-discounted rights issues, intra-group transactions or mispriced mergers, intending to drive the price down and thereby minimize inheritance taxes.

By contrast, for unlisted companies, inheritance tax is determined using a blended average of earnings value and net asset value. If the blended average amounts to less than 0.8x net asset value (NAV), then 0.8x NAV is used as the floor valuation.

The proposed bill would apply the unlisted company formula to listed companies in cases where the listed company’s shares are valued at less than 0.8x NAV.

At the same time, for companies trading above 0.8x NAV, a 20% surtax for controlling shareholders would be removed and it would also become possible to pay the tax bill in stock rather than just cash.

In Metrica’s view, the heavy burden of inheritance taxes is a primary cause of the “Korea discount”, depressing valuations for the whole market but particularly for conglomerates, which have reached valuations as low as 0.2x or 0.3x NAV. So to the extent that this bill succeeds, it could create a very powerful rally in the affected names.

The long-awaited impeachment trial verdict in Korea is due the day after this newsletter goes to press. If the impeachment is upheld, a presidential election must be held within sixty days. A victory for the opposition candidate Lee Jae-myung, who narrowly lost to President Yoon in the last election, would have positive implications for the market, as it would allow the Democratic Party of Korea (DPK) to push through its corporate governance reform agenda unhindered. Conversely, a continuation of the status quo whereby the People Power Party holds the presidency and the DPK controls the National Assembly would be less favourable, as it would prolong the political stalemate. Even so, much progress was made on Yoon’s “Corporate Value-up” initiative in 2024 under essentially the same structure, and we would expect the governance reform momentum to continue in any case. It is worth remembering that Japan was able to achieve significant progress towards the same goals through non-legislative measures.

Korea’s government and main opposition party continue to push their respective stock market and corporate governance reform agendas. The vice-chairman of the Financial Services Commission (FSC) appeared at several conferences in February to highlight the government’s continued commitment to “Value-up”. On one measure – share buybacks – Value-up is already proving to be a success, with Korean companies increasing buybacks by 72.8% year-on-year to $9.8 billion in 2024. However, both the FSC and Korea Exchange want to boost the number of listed firms releasing general Value-up plans beyond the current 114. As such, the government is promoting a bill to reduce corporate taxes for companies practising Value-up and to lower dividend income taxes for investors in such firms.

On the opposition side, the Democratic Party of Korea (DPK) has been pushing through its amendment to the Commercial Act which makes company directors answerable to shareholders as well as companies.

The bill is likely to be presented to the National Assembly in March. Both the government’s and the opposition’s bills face obstacles given Korea’s turmoil, but the important point is that both ends of the political spectrum want to see the stock market higher.

As such, if the presidential impeachment issue is resolved soon (current projection is mid-March) and stability returns, via elections or otherwise, it should be a positive for the reform programme.

In the meantime, another upcoming catalyst for the market is the lifting of the short-sell ban at the end of March.

Metrica believes that the 15-month ban has hurt the market’s liquidity and depressed valuations, to the extent that Korea is now the only market in Asia-Pacific trading below book value and one of two below 10x earnings (figure below).

Asia-pacific market price-to-earnings and price-to-book ratios, 28 February 2025

Looking at the relative value universe presents a similar picture, with Korea spreads on average far wider than anything else seen in the region. If the original objective of this ban was to support the stock market, it has been unsuccessful. During the period since the ban was enacted, the Korean market has returned exactly 0.0%. By comparison, markets which freely allow short-selling such as the US, Europe and Japan have returned 36.4%, 31.4% and 13.6% respectively over the same period. MSCI also cited the short-sell ban as a reason not to upgrade Korea to Developed Market status.

There is always a risk that, given the depressed state of the Korean market, the ban will be extended yet again. However, Metrica is cautiously optimistic that the authorities will do the right thing. A resumption of short-selling should draw capital back into the market, and in particular into some of the more extreme spreads that can be found in the RV universe.

Minority shareholder protection

It was good to see the Korea Exchange following though on its commitment to protect minority shareholders in the case of spin-off re-listings. Binggrae, a manufacturer of dairy products, was forced to withdraw its plan to split into a holding company + operating company after the exchange refused to approve the listing of the new company. This is historic as the exchange has previously waved through such restructurings.

In the past, majority owners of Korean companies loved to convert them into holdcos + opcos, as this allowed them to take capital out while maintaining control. It also depressed the prices of holdcos, lowering potential inheritance taxes. Perhaps the Binggrae case is a sign that Korea is finally starting to move on from this abusive and outdated practice which is no longer tolerated by any developed market globally.