[K-Value Up, Investors Speak] ② "No Substance" Lack of Momentum to Move Institutional Investors

"Value-up Plan Lacking Substance... Need to Watch for Additional Announcements"
"Won't End with Words Only... Expecting Legal Amendments"

Institutional investors such as pension funds and mutual aid associations managing hundreds of trillions of won in citizens' retirement assets in the fund sector evaluated the government's corporate value-up support measures as not effective enough to immediately impact their institutional management strategies. Although a lackluster measure was announced, they anticipated that the effect would vary depending on the expansion and continuity of the policy.

Kim Ju-hyun, Chairman of the Financial Services Commission, is delivering a congratulatory speech at the '1st Seminar on Corporate Value-Up Support Measures for the Leap of the Korean Stock Market' held on the 26th at the Korea Exchange in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

Ineffective Measures... "Institutions Don't React to 'Tricks'"

A chief investment officer (CIO) of Institution A, who requested anonymity, said, "The announced content lacks substance," adding, "They said they will announce sequentially until the end of the year, so we will wait and see, but at this stage, there is practically nothing to base decision-making on this program." He hinted, "Companies are conducting IR (Investor Relations), but when asked if they are preparing anything related to the value-up program, no company has given a sharp answer yet."

He said, "How much dividend to pay, share buybacks, and such are important, but ultimately companies need to make money well," adding, "There should be parallel content about creating conditions to improve corporate growth potential and profitability for institutions to expand investments, but all of that is missing. It is difficult to move based on such simple indicator announcements."

This policy referred to the Japanese stock market, which recorded an all-time high in 34 years, surpassing the bubble economy era. However, institutions judge that the influence of the value-up program on the heated Japanese stock market, which has set record highs, is only partial.

The CIO of Institution A explained, "There is a misunderstanding that the Japanese stock market is rising because of the value-up program, but it is only one of several factors," adding, "The biggest influence is the weak yen (Enjeo), and it benefits from the US-China conflict."

The chief investment officer (CIO) of Institution B said, "From the perspective of long-term investing institutions, it is difficult to change management strategies based on just one factor like this," adding, "There needs to be a more reliable announcement or visible change for it to be possible." He expressed doubts, saying, "There is still a question whether this is being carried out with much thought and a solid plan to fundamentally resolve the discount, or if it will just be a brief flash and end," and added, "Foreigners probably have a similar view," indicating a more cautious stance.

Additional Measures Such as Amendments to Commercial and Tax Laws, Continuity of Policy Is Key

Although the corporate value-up support policy was announced prematurely, there is also an expectation that positive upward effects on the Korean stock market can be anticipated if detailed additional measures and the inflow of funds exiting China coincide.

Heo Jang, CIO of the Korea Local Government Officials Mutual Aid Association, said, "After the election, follow-up measures related to amendments to commercial and tax laws are expected," adding, "As foreigners are reducing their investment proportion in China, if Korea can provide additional incentives, an environment conducive to capital inflow could be created." He added, "I don't think the government will just stop at words. It's a matter of speed, but I believe incentives that can raise corporate value will continue to be introduced," and said, "There is no need to attach meaning to temporary adjustments after the announcement. The direction is good."

Advice was also given to pay attention to quality small and medium-sized enterprises and large corporations with substantial cash holdings. Lee Sang-min, CIO of the Construction Workers Mutual Aid Association, said, "From the perspective that low price-to-book ratio (PBR) stocks benefit, quality small and medium-sized enterprises may attract attention, and from the perspective of selecting value-excellent companies, large corporations that make up a large part of the KOSPI composition may benefit," he mentioned. Heo Jang CIO said, "Although PBR is low, companies with good growth potential have a good opportunity to be noticed. Companies with large cash holdings also need attention," advising, "However, be careful of 'value traps.' It is essential to distinguish companies with low return on equity (ROE) and PBR due to lack of growth."

This content was produced with the assistance of AI translation services.