Why the disappointing 'value-up' must continue

Since the U.S. presidential election ended, the Korean stock market has been on shaky ground, and conversations often end with people lamenting the state of the domestic market. A friend of mine quipped, somewhat bitterly, “Even when everyone said, ‘Only the smart ones leave the Korean stock market,’ I held on - but now I’ve let go.”It’s hard to blame anyone for feeling that way. The KOSPI has significantly underperformed compared to major stock markets in the U.S., Europe, and Asia.

While some point fingers at President-elect Donald Trump’s “America First” policies and high tariffs, which have hurt Korea’s export-driven economy, it feels like a weak excuse. Trump may be intimidating - he once called tariffs “the most beautiful word in the dictionary” - but even China, a direct player in the U.S.-China trade war, saw less decline than we did.

If the entire world is dealing with Trump’s re-election, yet only Korea’s stock market is struggling this much, the problem must lie with us. Looking at it objectively, while the U.S. stock market continues churning out new leaders such as Nvidia and Tesla, Korea’s market has relied on Samsung for decades. The only thing that stopped the KOSPI’s recent decline was Samsung’s announcement of a 10 trillion won share buyback plan. Trust in the market has hit rock bottom with rampant conspiracy theories. For instance, Lotte Group's stock prices plunged due to unverified rumors before recovering - an all-too-clear sign of how vulnerable our market is to speculation. Adding insult to injury, some companies have exploited the chaos to sneak in “stealth” announcements of rights offerings.

The government’s value-up initiative, launched earlier this year, hasn’t delivered meaningful results either. The program was intended to address the "Korea Discount" (the undervaluation of the Korean stock market) through measures such as a value-up support plan and the introduction of the Korea Value-Up Index, featuring promising companies. However, the index immediately sparked controversy over its selection criteria and has proven powerless in the face of a market downturn. To make matters worse, one of the companies included in the index was found to have mishandled a rights offering disclosure, further enraging investors.

Some have gone so far as to call it “value-down” instead of “value-up.” But it’s only been a year - far too soon to declare the initiative a failure. The Korea Discount has been a decades-old issue, and it’s unrealistic to expect it to disappear overnight. More importantly, value-up is fundamentally a long-term strategy.

We need patience and persistence over the long haul to see real change for at least a decade. This is the only way to shift market dynamics and create lasting results. While the value-up initiative may not radically transform the competitiveness of Korean companies, it could help rebuild some of the trust that has eroded in the stock market. If we want to stop losing investors, we must double down on change.