President Lee: “Recent Stock Market Correction ... Resolve for Capital Market Reform Put to the Test Again”

[Financial News] President Lee Jae Myung said on the 13th, “Our stock market has recently undergone a major correction,” adding, “Our government’s resolve and policies on capital-market reform have once again been put to the test.”
At a capital-market policy meeting he chaired that day at the Korea Exchange in Yeouido, Seoul, President Lee stressed, “Normalizing the capital market is our government’s firm policy direction and resolve. There is no room for doubt about that.” On the recent market trend, he said, “The higher the mountain, the deeper the valley,” adding, “Conversely, if the valley is deep, perhaps the mountain will be high too, I think.”
President Lee said, “The public is also very concerned about the current state of our stock market. Government officials are concerned as well. There must be a solution. Naturally, every problem has a solution,” adding, “I hope to hear many candid views from the experts here today.”
In particular, President Lee said, “Since normalizing what is abnormal is a core task of our government, I believe that normalizing the asset market and the financial market is something our government must do and is fully capable of doing.”
He continued, “It is clear that our companies’ technological capabilities, our industrial competitiveness and the fundamental capabilities of our people are at a world-class level,” adding, “The outside world rates us far more highly than we rate ourselves. We ourselves do not yet seem to fully appreciate the standing we have attained globally. I believe it is also our government’s job to help us regain that sense.”
President Lee identified restoring trust as the key to capital-market reform. Referring to investors’ concerns about corporate management that treats shareholders fairly, dual listings, the outflow of companies’ retained earnings, the consistency of government policies and geopolitical risks, he stressed, “I think the most important thing is to eliminate concerns, inspire confidence, create a market that can be reasonably predicted—in the end, to restore that trust.”
He said that systems had been put in place to address corporate cultures that do not respect shareholders and controlling shareholders’ abuse of managerial control, but added, “We have corrected flawed systems and adopted good ones, but I still feel that we have some way to go.”
On unfair trading, he said, “We are taking firm action at the whole-of-government level against stock-price manipulation and other such unfair practices. We are also increasing the number of enforcement personnel, and I have separately instructed the Serious Crimes Investigation Agency to crack down particularly strictly on unfair practices in the financial and capital markets.”
On the undervaluation of companies, he noted, “There are still many companies valued below their book value. But when you look closely at the details, it seems the problem is not just performance or growth prospects.” In particular, he said suspicions were being raised that “share prices are being managed to reduce inheritance taxes,” adding, “I think the core issue is the distrust that companies may not respect shareholders as owners but instead see them as targets to exploit, or that controlling shareholders may be abusing their managerial control.”
He said that improvements to the mandatory tender offer system must take into account both the need to give minority shareholders an equal opportunity and the concern that “if handled poorly, it could end up acting as an obstacle that effectively blocks M&A.”
He also called for reform of the KOSDAQ market and an expansion of the stable investment base. President Lee said, “KOSDAQ has become quite a problem again lately. Many people are concerned,” adding, “Insolvent and underperforming companies should be swiftly delisted through proper application of the delisting criteria. It also seems important to ensure that companies with technological capabilities and growth potential are not undervalued or harmed in the process.”
He continued, “We must review the overall frameworks governing market entry, exit and valuation and make sure the KOSDAQ market becomes one where innovative companies can grow and investors can invest with confidence,” adding, “For stable long-term growth, we will need an investment base that supports the market, and we should also work to create the right environment and improve the relevant systems.”
President Lee stressed, “The government will focus on restoring trust in the market. The government’s job is to establish fair and transparent market rules and ensure that they are properly applied to everyone without exception,” adding, “I believe that if we create a reasonable system that companies and investors can predict and restore trust in the market, companies in our market will once again receive proper valuations commensurate with their actual worth.”
He said, “By anyone’s assessment, things are abnormal right now. There may be various factors, but how quickly can we overcome this abnormality? I believe it will be overcome someday, but it is important to do so as quickly as possible.”
President Lee also remarked on the attendees’ red ties, saying, “I went with red too. I’ll start the meeting hoping our stock market will resume its upward trajectory.”
[email protected] Choi Jong-geun, Seong Seok-woo Reporter