Corporate Value-up Program guidelines disappoint investors
Market watchers and investors have expressed disappointment over the guidelines for the government’s Corporate Value-up Program announced, Thursday, taking issue with what they perceive as a lack of specific details regarding tax incentives for participating companies.
The essence of the unveiled draft for the program, aimed at addressing the so-called “Korea discount” (a lower valuation of Korean stocks compared to their global peers), is to encourage corporations to voluntarily disclose their future plans to enhance shareholder value.
The authorities expect investors to use this information to make investment decisions, fostering a virtuous cycle in the capital market.
However, market insiders are questioning the effectiveness of the plan in the absence of detailed tax incentives for companies. Reflecting this disappointment, the stock market, which had already started turning bearish due to an overnight meeting of the U.S. Federal Open Market Committee, showed further pessimism. Representative value-up beneficiary sectors such as insurance, banking, and securities fell by more than 1 percent.
The Financial Services Commission (FSC), the Financial Supervisory Service (FSS), and the Korea Exchange convened a second seminar on the Corporate Value-up Program and unveiled guidelines for a new approach to disclosing corporate value enhancement plans.
In contrast to existing disclosures that focus on historical information, companies participating in the Corporate Value-up Program will select key indicators essential for value enhancement, establish medium- to long-term goals, and disclose specific plans to achieve these goals. This may include initiatives such as expanding research and development (R&D), restructuring business portfolios, and retiring treasury stocks.
“I expect listed companies to actively participate in the establishment and implementation of the plan by utilizing various incentives, guidelines, consulting, and education support measures (which will be provided by financial authorities). And, I hope investors properly evaluate these efforts and reflect them in their investment decisions,” FSC Vice Chairman Kim So-young said.
The released guideline will be finalized in May after gathering opinions, and companies will be encouraged to start the disclosures when they become ready.
“Enhancing corporate value is a task that must be pursued with a long-term perspective. In particular the guidelines to be discussed today are not the end, but the beginning of corporate value-up support measures,” Kim added.
The FSC announced that the development of the Korea Value-up Index and the listing of related exchange-traded funds (ETFs) will proceed as planned, with the index expected to be developed by the third quarter and the ETF listings anticipated by the fourth quarter of this year.
However, the announcement did not include details of the tax incentives that were previously hinted at by the authorities.
“Once the review is finalized, the specific tax support measures will be announced,” the FSC said.
On April 19, Finance Minister Choi Sang-mok referred to several support measures, including easing the corporate tax burden on increased shareholder returns through dividends and stock retirement. He also announced plans for separate taxation of dividend income for shareholders of companies that are expanding their dividend payouts.
Following his remarks, the stocks of value-up beneficiary companies experienced a sharp rebound. However, implementing these benefits will require cooperation with the main opposition Democratic Party of Korea (DPK), as revisions to existing laws are necessary.
“The first seminar in February was disappointing, as there was no mention of tax policies at all. However, it is noteworthy that this time there were discussions about corporate tax and separate taxation of dividend income, signaling potential progress in addressing these key issues. Nevertheless, due to the lack of specific details, the market’s reaction is expected to show disappointment,” a securities industry source said.