Shin Byung-mook, Head of the Korea Exchange New York Office, who has been informing local investors in New York about South Korea’s value-up program and corporate conditions, recently felt a growing global interest in the value-up policy. Among local investors, there is a strong trend to examine how Korean companies can improve their ROE (return on equity) before deciding whether to invest. Some are comparing Japan’s value-up program with South Korea’s policy and even suggesting that Korea should set specific ROE targets, showing a deepening understanding of Korean firms.
Speaking at a meeting in Manhattan, New York, U.S., on the 16th (local time), Shin said, “Since domestic market indices have risen significantly this year, there is strong interest in whether the value-up program can steadily boost stock returns.” He added, “U.S. investors have witnessed successful cases where Japan’s value-up program strengthened corporate profitability, and they now hold similar expectations for South Korea.”
The core of the value-up program is “corporate disclosure and improvement commitments.” Companies publicly disclose cash flow, earnings generation capabilities, and shareholder return policies through regular and ad-hoc disclosures, while also outlining what improvements they plan to make. In particular, in South Korea, shareholder return policies such as share buybacks, cancellations, and dividends form a major pillar of the value-up program.
Shin noted that “there are both expectations and concerns about the value-up program among local investors.” Some argue that beyond lifting market indices (KOSPI and KOSDAQ), the program should focus on strengthening corporate intrinsic value. Shin stated, “Many overseas institutional investors believe that enhancing corporate fundamentals should be the goal of the value-up policy. Requests to present ROE improvement plans—such as raising ROE above 8% through improved capital efficiency—have increased significantly.”
There are also many large foreign investors who hesitate to invest in companies with strong earnings but low ROE (below 5%) due to excessive cash reserves. Shin explained, “The value-up program is a voluntary disclosure initiative by companies. Japan set a profitability benchmark of ‘ROE above 8%.’ In contrast, South Korea has focused on setting PBR (price-to-book ratio) targets, but now there are growing calls to also establish ROE targets.”
With the introduction of the integrated foreign investor account in May this year, it has become easier for foreigners to directly invest in Korean stocks, leading to increased interest and understanding of Korean companies. The channels through which investor feedback is received have also diversified. Shin said, “Even without active outreach, we receive specific inquiries about Korean companies at least once or twice a week. This increase in new retail investors and inquiries after the launch of the integrated foreign account has contributed significantly.” Starting in September, foreigners will also be able to invest in ETFs (exchange-traded funds) through the integrated account, further expected to heighten interest in the K-capital market.
Shin emphasized that it is now time to build trust in the K-capital market starting with the value-up program. He stated, “We need to see so-called superstar success stories where U.S. bank and securities firm private bankers achieve high returns solely by investing in Korean companies or generate windfall profits through K-market funds. To establish South Korea as a trustworthy investment market, such well-known success stories must emerge and spread locally in the United States.”
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