Low-PBR List Disclosure, KOSDAQ Redesign... Capital Market Meeting Chaired by President Lee Jae Myung

[Financial News] The government will pursue reforms to the capital market to boost the value of undervalued companies, redesign the KOSDAQ market and expand long-term investment funds. Measures including making the disclosure of a list of low price-to-book ratio (PBR) companies more effective and accelerating the exit of troubled companies are on the agenda.■ “Improve the Stewardship Code and 5% reporting rule”The Financial Services Commission (FSC) said it will hold a “Capital Market Policy Meeting” at 9:30 a.m. on the 13th in Yeouido, chaired by President Lee Jae Myung. The meeting, under the theme “A Capital Market That Earns Trust: Asking Questions and Finding Answers on the Ground,” will bring together around 50 people, including financial authorities, the National Assembly of the Republic of Korea, the financial investment industry, the business community, institutional investors and experts.
The meeting will feature expert presentations and open discussion on three topics: expanding shareholder-centered management and enhancing corporate value; the venture ecosystem and KOSDAQ redesign; and broadening the stock market’s demand base, with a focus on long-term and institutional investors.
Lee Hyo-seop, a research fellow at the Korea Capital Market Institute who will present on enhancing corporate value, said that although the KOSPI’s PBR had risen to 1.74 times as of October this year, it remained below those of major economies, including the United States at 5.67 times, Taiwan at 5.55 times and Japan at 2.03 times. He stressed that corporate revaluation, which has been concentrated in a few sectors, should spread across the market, given that 560 KOSPI-listed companies and 877 KOSDAQ-listed companies have PBRs below 1.
The research fellow proposed improving the Stewardship Code and the 5% reporting rule to make disclosure of the low-PBR company list more effective and encourage institutional investors to engage with companies as shareholders. He also proposed measures to normalize the M&A market, including determining fair values for merger consideration and obtaining external evaluations, promoting Korean-style bear hugs, and introducing a mandatory tender offer system.
On whether the mandatory tender offer threshold should be set at “50% plus one share” or 100%, he said a phased approach was needed that took into account both the need to protect shareholders and the possibility of stifling the M&A market. He also said companies that deliberately suppress their share prices should be taxed through improvements to tax laws, including the Inheritance and Gift Tax Act.
■ “Toward a KOSDAQ Market of High Entry and Exit”Plans to redesign the KOSDAQ market will also be discussed. In presentation materials, Lim Hyeong-jun, a research fellow at the Korea Institute of Finance (KIF), said that because venture capital (VC) exit routes are concentrated in initial public offerings (IPOs), companies are listing prematurely while the exit of troubled and underperforming companies is delayed, undermining market confidence and discouraging long-term and institutional investment.
Lim proposed a dynamic “high-entry, high-exit” environment as a policy goal, where strong, high-growth companies enter the market while troubled companies are swiftly removed. He said that before IPOs, M&A and secondary markets should be developed to diversify exit routes, and that lead underwriters and institutional investors should be held more accountable during the listing process.
The possibility of dividing the KOSDAQ market into segments based on company characteristics was also raised. Such a move could attract new long-term and institutional investment and reduce leading companies’ incentives to transfer their listings to the KOSPI. However, it could stigmatize companies in lower-tier segments, making detailed design and operation important.
Kim Hak-gyun, head of the research center at Shinyoung Securities Co., Ltd., who will present on supply and demand, said in presentation materials that this year’s domestic stock market saw retail investors and listed companies as net buyers, while foreign investors and institutions were net sellers. The share of stocks in household financial assets rose from 20.2% at the end of March last year to 34.4% at the end of June this year. From the beginning of this year through the 5th, net household fund inflows into the stock market reached a record 147.4 trillion won.
Kim said that for these inflows to continue, individual investors need to build a “collective experience of success,” and stressed the need to improve low dividend payout ratios and manage the quality of listed stocks. He also proposed developing the Individual Savings Account (ISA) into a lifelong asset-management platform, promoting publicly offered funds and expanding education on long-term and regular investing.
Participants will hold open discussions on key capital market policies, including the mandatory tender offer system, promoting M&A involving underperforming companies, strengthening delisting rules and dividing the KOSDAQ market into segments. No separate KOSDAQ stimulus measures are scheduled to be announced. The government plans to gather views from the field and written proposals presented that day and reflect them in future capital market policies.

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