South Korea unveils reform measures to tackle ‘Korea discount’

By Thomson Reuters Feb 25, 2024 | 6:37 PM

SEOUL (Reuters) – South Korea will nudge listed companies with low valuations to report plans to boost shareholder returns under reform proposals announced by the financial regulator on Monday aimed at reducing the ‘Korea discount’ on stock prices.

South Korea is using Japan’s playbook to boost the value of its companies, analysts say, as its neighbour’s stock market surges to a record high.

Under the “Corporate Value-up Programme”, the government will introduce an index of firms with strong shareholder value, South Korea’s Financial Services Commission (FSC) said.

It is also considering tax incentives – such as preferential treatment in tax policies – for companies that enhance their market value and increase shareholder returns, the FSC said.

“We expect it could help resolve the problem of ‘Korea Discount'”, once these measures are effective, FSC said in a statement.

The ‘Korea discount’ refers to a tendency for South Korean companies to have lower valuations than global peers due to factors such as low dividend payouts, and the dominance of opaque conglomerates known as chaebols.

(Reporting by Ju-min Park; Editing by Emelia Sithole-Matarise)