The Korea Value Up Index will undergo rebalancing (changes in constituent stocks) next month. While a value up program led by the government is being implemented to boost the stock market, resolving undervaluation remains a distant goal. Attention is focused on whether the rebalancing can serve as a catalyst for a rebound.

Last November, a greeting is given at a corporate value-up briefing for listed companies' inside and outside directors held at the Korea Exchange in Yeongdeungpo-gu, Seoul. The Korea Value-Up Index ETF, which was listed at the time, has a rebalancing scheduled for the 27th./Courtesy of Korea Exchange

According to the Korea Exchange on the 25th, the constituent stocks of the value up index will be newly organized on the 27th. The index inclusion of the stocks disclosed that day is scheduled for the 13th of next month.

As of the 23rd, the revenue rates of the three most traded value up exchange-traded funds (ETFs), including TIGER Korea Value Up, KODEX Korea Value Up, and KIWOOM Korea Value Up, are 6.88%, 7.80%, and 6.45%, respectively. The revenue rates of 12 value up ETFs range from 6.35% to 8.75%.

This period exceeds the ETF revenue rates tracking the KOSPI index, which range from 1.43% to 3.12%.

However, the popularity of value up ETFs continues to decline. After the listing of ETFs last November, the average daily transaction amount of TIGER Korea Value Up fell from 39.95964 billion won to 3.1706 billion won last month. The decrease amounts to nearly 90%. KODEX Korea Value Up and KIWOOM Korea Value Up also saw similar declines in transaction volume.

The participation of corporations is not active. The number of listed companies that have participated in the value up disclosure is less than 7% of the total. The overall price-to-book ratio (PBR) of the KOSPI market has recently dropped to around 0.9 times, compared to 1 time a year ago.

In the securities industry, there are expectations that the rebalancing next month will provide new stimuli for the value up index.

Lee Kyung-yeon, a researcher at DAISHIN SECURITIES, noted, "With the approaching presidential election, whether corporations will continue the value up program is being questioned," adding, "The Democratic Party of Korea also prepared a project similar to the value up, called the Korea Boost Up Project, last year."

He continued, "Regardless of the party, the willingness to promote policies aimed at addressing the Korea discount in the stock market will not differ."

Lee Jeong-bin, a researcher at Shinhan Investment Corp., emphasized, "In conjunction with rebalancing, there may be a response to momentum depending on policies after the presidential election," stating, "Active disclosure participation by corporations and incentives for companies participating in the value up are necessary."