KB Securities noted on the 9th that the revision of the Commercial Act could resolve the 'Korea discount.'
The amendment to the Commercial Act was attempted once last year, but was discarded due to the government's veto at that time. The Democratic Party officially announced its plan to reintroduce the amendment at a press conference for the 'Republic of Korea Stock Market Activation Task Force' on the 5th. The amendment contains provisions that obligate directors to fulfill their duties for the benefit of shareholders.
Representative Lee Jeong-mun, who proposed the amendment to the Commercial Act, stated, "The current Commercial Act does not stipulate directors' duty of loyalty to shareholders, leading corporations to prioritize the interests of major shareholders while neglecting the interests of minority shareholders." He added, "The perception that shareholders' interests are not protected is spreading, which hinders the influx of foreign capital into the domestic stock market."
Recently, KB Securities summarized opinions on the amendment to the Commercial Act through local investor meetings in the United States, the United Kingdom, Hong Kong, and Singapore over the past month. As a result, foreign investors pointed out issues such as Korea's low growth, aging population, lack of transparency in governance, low dividend payouts, and insufficient protections for minority shareholders. However, it was noted that if the amendment passes, structural changes in the Korean stock market are expected due to the expansion of directors' duties and the introduction of a cumulative voting system.
Kim Dong-won, a researcher at KB Securities, analyzed, "The government's amendment to the Commercial Act is expected to accelerate the inflow of foreign investors' funds into the Korean stock market," and added, "This will lead to structural changes in resolving the Korea discount and a reevaluation of valuations (corporate value)."
KB Securities stated that it recommends expanding the share of undervalued large-cap semiconductor stocks such as Samsung Electronics and SK hynix, which have undergone sufficient stock price adjustments in the first half of the year, and holding companies expected to see a decrease in net worth discount in the future.