JP Morgan AM: Korea's market reforms are a step in the right direction
JP Morgan AM: Korea's market reforms are a step in the right direction
Following the success of Japan’s market reforms, South Korea has indicated that it too would like to improve corporate governance and boost shareholder value.
Similar to its Asian neighbour, a large proportion of Korean stocks have historically traded at a price-to-book ratio of less than 1, and policymakers are seeking to end this so-called ‘Korea discount’. Korea’s ‘Corporate Value-Up Programme’ is still in its infancy but, like Japan, encourages companies to assess their relative low valuations and provide solutions.
Critically though, participation in Korea’s programme is voluntary and there are no penalties for failing to meet targets. Therefore, while the plans introduced are undoubtedly a positive step in the right direction, the voluntary nature of the programme could mean it takes some time for the full benefits to be unlocked.
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