The Korea Exchange carried out a large-scale inclusion and exclusion of stocks ahead of the Korea Value-Up Index rebalancing on the 13th of next month. The number of constituent stocks decreased from 105 to 100, while a significant number of new stocks were added from corporations that announced value enhancement plans.
Samsung Electronics, which had raised concerns about its exclusion due to not announcing a value enhancement plan, remained in the index. However, evaluations suggest that the burden on Samsung Electronics regarding announcements has increased, as from next year's rebalancing, the index will be constructed mainly with corporations fulfilling disclosure requirements, regardless of company size. There are also calls for additional incentives, as a considerable number of corporations among the value-up index constituents still have not issued value-up announcements, including Samsung Electronics.
On the 27th, the Korea Exchange announced the results of the regular changes to the value-up index, adding 27 new stocks, including Hyundai Rotem, KRAFTON, and JB Financial Group, while excluding 32 stocks, including ISU PETASYS, Hyundai Marine & Fire Insurance, and OTOKI.
The Exchange announced the value-up index in September last year with the aim of resolving the undervaluation of the Korean stock market. Among the corporations that met criteria such as being within the top 400 by market capitalization, not posting losses in the last two consecutive years, having paid dividends or performed stock buybacks consecutively for two years, and having a price-to-book ratio ranking within the top 50% in the entire market or industry, the top 100 corporations with the highest return on equity rankings within their industries were included in the index. After issues of fairness in the inclusion arose, five additional stocks were added in December of the same year.
At that time, the Exchange noted that starting from the regular changes in 2025, it would apply special inclusion for value-up exemplary corporations and provide incentives or penalties for index inclusion based on whether the value-up announcements were made. Consequently, there were opinions that Samsung Electronics, which had not yet made a value-up announcement, might be excluded leading up to the regular changes.
However, it seems that the Exchange found it practically difficult to exclude Samsung Electronics from the value-up index. As the company is the market leader in terms of KOSPI market capitalization, its representative nature in the market cannot be ignored, and the market cap share within the value-up index also reaches 30%, meaning its exclusion would impact the reliability of the index.
From Samsung Electronics' perspective, presenting a proactive business strategy is challenging due to concerns about tariffs and uncertainties in performance this year. Furthermore, it has previously announced plans to partition 10 trillion won of treasury stock purchases, which suggests that additional value-up plans may take time to be proposed. However, with other major corporations like SK hynix having completed their value-up announcements, there are observations that delaying these announcements further will be difficult. Samsung Electronics continues to demonstrate its willingness to fulfill disclosure requirements, such as attending the KOSPI value-up meeting held by the Exchange on the 19th.
While the Exchange has significantly increased the proportion of listed corporations in the value-up index from 25% to 61% through this regular change, there are still 39 stocks, including Samsung Electronics, LIG Nex1, ORION, and CLASSYS, that have not yet made value-up announcements. Since the introduction of the value-up program, a total of 153 listed companies have made value-up announcements as of the 26th, which is only 5.5% compared to the total number of listed companies (2,762).
If the number of disclosing corporations increases, the range of stocks that the Exchange can choose from will widen, leading to a more stable and balanced index composition. A representative from the securities industry stated, “In addition to the existing incentives, tax support such as separate taxation on dividends and tax reductions for shareholder-returning corporations must be expanded to increase the number of participating corporations, which can improve the long-term return of the value-up index.”
Meanwhile, on the same day, Korea Zinc and ISU PETASYS, which faced allegations of undermining shareholder value last year, were excluded in the regular changes to the value-up index.
한편 이날 밸류업 지수 정기변경에서는 지난해 주주가치 훼손 논란이 있었던 고려아연(010130)과 이수페타시스(007660)가 편출됐다.
The Exchange stated, “For listed companies involved in a management rights dispute that had publicly announced a capital increase for management rights defense, and companies seeking to acquire unrelated businesses through large-scale capital increases, we decided to exclude them after deliberation by the index operation committee as they fell under the scrutiny criteria for acts that undermine shareholder value.”