Korea Exchange reassures Corporate Value-up push is on track
Under the South Korean government’s push to boost corporate value, listed companies bought back shares worth 18.8 trillion won ($12.9 billion) last year, marking an over 10 trillion won on-year surge, according to the country’s bourse operator, Korea Exchange, Thursday.
In February, the country launched the Corporate Value-up Program, aiming to boost the capacities of listed companies and tackle the persistent undervaluation of its stock market, often referred to as the "Korea discount."
With the initiative, 102 companies announced plans to enhance their corporate value last year. Of the 102 companies, 85 were listed on the benchmark Kospi and 17 were on the secondary Kosdaq bourse.
As the Corporate Value-up Program focuses on boosting value through enhancing shareholder returns, the treasury shares repurchased by companies amounted to 18.8 trillion won in 2024, over two times higher than the 8.2 trillion won in 2023. The stock exchange explained it is the largest amount recorded since 2009, when it started to compile related data.
Around 13.9 trillion won worth of the repurchased stocks were canceled, nearly triple the 4.8 trillion won in 2023.
With raised awareness of shareholders’ returns, the companies decided to execute a combined 45.8 trillion won cash dividend payout, marking a 6.3 percent rise from 2023.
Yet, despite the country's efforts to boost corporate value, Kospi showed an average stock return rate of minus 9.6 percent due to the sluggish market. Kospi was one of the most underperforming stock indices in the world last year.
Though the market remained slow, the Kospi companies that shared their value-up plans experienced a 4.9 percent rise in their average share price last year.
Even the Kosdaq companies showed a similar performance. While the average share price of all Kosdaq-listed companies fell by 21.7 percent last year, the companies that have shared their value-up plans experienced a 9.4 percent fall in their average share price.
Though the participating companies were mostly companies from the financial sector with low price-to-book ratio, meaning undervaluation, in the early stage, companies from other sectors such as manufacturing and retailing eventually participated in the announcement-making, the bourse operator explained.
Of the companies, 22 percent were from the manufacturing sector, 19 percent were from the banking sector, and 8 percent were retailers.
A total of 49 companies have submitted English-language filings on their plans to enhance corporate value to ramp up communication with foreign investors.
To encourage more companies to participate in the value-up program, the Korea Exchange is to recognize companies that have shown an outstanding value-up performance in May. The selected companies are to benefit from streamlined tax procedures and incentives. The screening standards are to be shared in the first quarter of next year.
An annual reshuffle of the value-up index is set to take place in June. The index, a stock index comprising "best practice" Korean companies complying with the Corporate Value-up Program, currently consists of 105 constituents but will be cut down to 100 in June.
