Kim Hak-gyun, Research Center Director at Shinyoung Securities, stated at the '2026 Maeil Economic Capital Market Forum' held last month at Korea Exchange in Yeouido, Seoul, that Korean stocks remain structurally undervalued despite KOSPI reaching the 8000 level and surpassing the S&P500 for the first time in 46 years since both indices started at 100 in January 1980. The apparent strength is an illusion driven by a handful of semiconductor giants, as over half of Korean listed companies still trade below 1x price-to-book ratio (PBR), reflecting investor distrust in corporate capital efficiency. Kim attributed the persistent discount to companies hoarding cash from past growth periods while generating return on equity (ROE) of only 3-4%, comparable to bank deposits, and failing to return value to shareholders through dividends. This analysis comes after three Commercial Code amendments enacted last year introduced fiduciary duty to shareholders, creating regulatory pressure for listed companies to demonstrate clear capital allocation strategies or face market consequences.
KOSPI Surpasses S&P500 After 46-Year Race From Identical 100 Starting Point
In January 1980, Korea's KOSPI and the US S&P500 both started at an index level of 100. After 46 years, KOSPI settled at the 8000 level, surpassing the S&P500's 7000 level. Kim Hak-gyun noted that while the US market led in recent years, the Korean stock market surged explosively over the past year to reverse the standings. However, he characterized the milestone as ironic, stating that the 'discount' phenomenon where Korean companies are undervalued has actually intensified rather than diminished.
Over Half of Korean Listed Companies Trade Below 1x PBR Despite Market Rally
Korea's market PBR currently stands at 1.8x, escaping the global bottom tier last year to rank just above China. Kim Hak-gyun dismissed this improvement as "an optical illusion," explaining that the PBR increase resulted solely from a handful of large-cap semiconductor stocks like Samsung Electronics and SK Hynix driving prices higher. Over half of Korean listed companies remain below 1x PBR, meaning their total market capitalization is lower than their liquidation value (book value). Kim identified the root cause as companies accumulating cash from past high-growth periods but failing to deploy it effectively, resulting in market distrust. He stated: "If a company hoards capital and generates ROE of only 3-4%, it is no different from a bank deposit from an investor's perspective. From a societal standpoint, attracting capital and then stagnating without growth constitutes a form of 'value destruction.'" Kim warned that unless companies operate in capital-intensive growth industries like semiconductors or defense, mature-stage firms must decide how to allocate retained wealth—either return it to shareholders through dividends or forcibly raise ROE by reducing equity size.
Korean Corporate Dividend Payout Ratio Lags Regional Peers
Kim Hak-gyun analyzed the fundamental strength of the US stock market, noting that while Big Tech stock surges attract attention, the true power lies in a long-term shareholder return culture. He emphasized: "Stock prices can surge in an instant, but what keeps investors anchored in the market long-term is ultimately dividends." Compared to manufacturing-based competitors Taiwan, China, and Japan, Korea's dividend payout ratio (the proportion of net income paid as dividends) remains significantly lower. Kim acknowledged that dividends are not the only solution, citing SK Hynix as an example of a company with modest dividends that rewards shareholders by aggressively investing to grow enterprise value. The core issue is the defensive posture of low-PBR companies that have stopped growing yet continue to hoard assets.
Three Commercial Code Amendments Introduce Fiduciary Duty to Shareholders
Kim Hak-gyun identified the three Commercial Code amendments enacted last year, particularly the introduction of fiduciary duty to shareholders (requiring boards to consider shareholder interests alongside company interests), as the most groundbreaking change in capital market history. He assessed that the revised institutional framework forces listed companies to become conscious of shareholders. Kim asserted that the market's ultimate destination after the legal reforms is "strengthened communication between companies and shareholders." He warned that companies unable to prove to shareholders a clear vision for how they will allocate and utilize retained assets will be weeded out by the market.
FAQ
What did Kim Hak-gyun say about KOSPI reaching 8000?
Kim Hak-gyun stated at the forum held last month that KOSPI's 8000 level and surpassing of the S&P500 after 46 years is an illusion driven by semiconductor stocks, as over half of Korean listed companies still trade below 1x PBR due to low capital efficiency and inadequate shareholder returns.
Why do Korean companies have low PBR according to the analysis?
Kim Hak-gyun identified the cause as companies hoarding cash from past growth periods while generating ROE of only 3-4%, comparable to bank deposits, creating market distrust that they cannot effectively deploy capital to create value for shareholders.
What legal changes were introduced for Korean listed companies?
Three Commercial Code amendments were enacted last year, including the introduction of fiduciary duty to shareholders, requiring boards to consider shareholder interests alongside company interests and creating regulatory pressure for capital allocation transparency.
