Is KOSPI 10,000 Coming?
The 'Korea Discount' has long held back the Korean stock market. Can amendments to the Commercial Act finally solve this chronic issue and change the capital market paradigm? Explore the possibilities in this interactive report.
This material is an AI analysis example. Investment decisions are solely the responsibility of the individual.
Dashboard: bboongfree.blogspot.com
The Diagnosis: Reality of the Korea Discount
The Korea Discount is not just a rumor; it's a reality proven by data. Why is the Korean stock market systematically undervalued compared to global markets? Let's examine the causes through visual data and key factor analysis.
Global Market Valuation Comparison (Shiller CAPE)
Using the long-term valuation metric developed by Nobel laureate Robert Shiller, the undervaluation of the Korean market becomes clear.
1. Outdated Governance
Opaque corporate governance, such as controlling shareholders' pursuit of private interests and undermining of general shareholder value, is the biggest cause of distrust. Dual listings after spin-offs and unfair mergers are prime examples.
2. Poor Shareholder Returns
Profits earned by companies are excessively retained internally instead of being returned to shareholders through dividends or share buybacks. This reduces the attractiveness of stocks and worsens capital efficiency.
3. 'Enforcement Gap'
Although legal provisions exist, legal loopholes that fail to protect shareholders in reality, such as the 'fiduciary duty of directors' being limited to the company, have allowed for the tyranny of controlling shareholders.
The Solution: Ripple Effects of Commercial Act Reform
The recently proposed amendments to the Commercial Act directly target the core causes of the Korea Discount. A small change in the 'fiduciary duty of directors' clause could bring about a massive paradigm shift in Korean corporate governance.
Key Change: Expanding the Scope of Directors' Fiduciary Duty
Before
Directors must faithfully perform their duties for "the company."
↳ Decisions sacrificing general shareholders for the benefit of controlling shareholders could be excused as being 'for the company'.
After
Directors must faithfully perform their duties for "the proportional interests of shareholders and the company."
↳ Decisions infringing on general shareholders' interests significantly increase the legal risk of being a 'breach of fiduciary duty'.
✅ Stronger Shareholder Rights
Expanding the '3% rule' and mandating electronic shareholder meetings will substantially widen the channels for general shareholders to voice their opinions in management.
📉 Lower Cost of Capital
Reduced governance risk lowers the 'risk premium' demanded by investors, decreasing the company's cost of capital (WACC).
📈 Investment Boost
Thanks to a lower cost of capital, new investment projects previously abandoned due to low profitability become viable, promoting long-term growth.
KOSPI Scenarios: The Path to 10,000
The future of the KOSPI could change dramatically depending on the success of the Commercial Act reform. Check out the 5-year index trajectory simulations for three different scenarios based on the intensity of the reform.
Corporate-Level Impact Analysis
Macroeconomic changes are ultimately reflected in the value of individual companies. See in concrete numbers how the intrinsic value of Korea's leading companies could change after the Commercial Act amendment through simulations.
Perspectives from Global Investment Gurus
If world-renowned investors were to analyze the changes in Korea, what perspectives would they offer? Gain various insights through a virtual roundtable based on their respective investment philosophies.
