Korea developments in September
The Korean market presents a combination of attractive valuations and underlying reform catalysts. On the latter point, several important developments occurred during September:
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The second amendment to the Commercial Act came into force. This bars large listed companies from opting out of cumulative voting in their articles of incorporation, and the requirement applies from the first shareholders’ meeting held to elect directors after the effective date. It covers listed firms with assets above two trillion won, and it raises the number of audit committee members who must be elected separately to two. Despite some defensive measures from companies (e.g. staggered boards), we look forward to seeing the impact of cumulative voting in 2027 AGMs. ... more
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Why Korea remains Metrica's largest exposure
Despite the widespread perception of many Korea stocks as “value traps”, Metrica is excited about opportunities in this market for five reasons.
First, while the market has all but ignored the corporate reform theme over the last few months, the drumbeat of policy debate and regulatory implementation continues in the background. We can group the major initiatives into three categories according to progress: ... more
Metrica: "Measures against duplicate exchange listings, 'ban on new listings' insufficient"
Seoul is moving forward with the in-principle ban on new parent-subsidiary listings (otherwise known as “duplicate listings”). However, the “Korea Discount” can never be resolved until existing parent-subsidiary listings, which make up 18% of the market, are also dealt with. ... more
The new gold standard
Several positive developments in the corporate reform space occurred in January: ... more
History does repeat
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. ... more
Carrots and sticks redux
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. ... more
The twin themes
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. ... more
Taking care of business
Korea’s President Lee is a month into his term, and so far he has remained admirably focused on promoting the “KOSPI 5000” agenda. ... more
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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. ... more
Election result
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: ... more