Robeco Asset Management logo. /Roveco Asset Management
Robeco Asset Management, a global asset management company, predicted that the attractiveness of the Korean stock market will increase as Korean society faithfully implements a long-term roadmap to resolve the Korea decline (undervaluation of the Korean stock market).
Robeco announced on the 1st that it presents the causes of Korea’s decline and future prospects through a market strategy report.
Robeco said, based on Bloomberg data from 2014 to 2023, the price-to-book ratio (PBR) of Korean companies was only 58% of the developed country index average and 34% of the emerging market index average. emerging, and 34% of the emerging market index average. the average price-to-earnings ratio (PER) of the MSCI Korea index. ) was also found to be 12.2 times, a 19% and 28% decrease from the average PER of Taiwan and Japan during the same period, respectively.
Rather than geopolitical risks or corporate governance issues, Robeco is concerned about insufficient shareholder return policies (dividends and share buybacks), low return on equity (ROE), and limited growth, as revealed by the Korea Capital Market Institute (KCMI) in report on Korea’s Decline last year, potential was identified as the main cause of Korea’s decline. Korea’s dividend payout ratio in 2021 was 19%, the lowest among major countries. Taiwan was much higher at 55%, then the UK at 48%, Germany at 41%, France at 39%, and the US at 37%. China’s dividend payout ratio also reached 35%.
Robeco said various strategies are being reviewed as a way to increase shareholder return of Korean companies, and made a presentation at the first seminar on ‘Corporate Value Up Support Plan for Leap Forward in Korean Stock Market’ held by Financial Services. Commission with related organizations such as the Korea Exchange on the 26th The ‘Corporate Value Up Programme’ was evaluated positively. The program’s approach is similar to Japan’s Tokyo Stock Exchange’s April 2023 initiative, which ultimately contributed to the Nikkei 225 index reaching a new all-time high, he added.
He evaluated the current government of Korea as taking an active stance on stock market issues. It was based on the fact that they not only temporarily banned short selling, but also agreed on the need to reduce the excessive burden of inheritance tax, which has a significant impact on corporate decision-making. In addition, the highest inheritance tax rate in Korea is 50-60%, so the ownership share of the conglomerate family is bound to decline significantly over several generations, making corporate owners more concerned with maintaining control rather than maximizing shareholder value.
Seo Se-jeong, senior analyst and portfolio manager at Robeco, said, “Korean society is expected to accept the long-term road map to solve Korea’s decline and make continuous efforts to achieve it.” He added, “Korea is investing in big investment themes such as eco-friendly energy, technology, and AI. “A series of measures to resolve Korea’s decline by exposing it to a stable and attractive market will greatly contribute to improving Korea’s stock performance,” he said.
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