(Seoul = Newsis) Reporter Kang Soo-yoon = There was nothing to eat at the famous feast. The Korea Exchange’s highly anticipated ambitious project, the ‘Korea Value Up Index’, was released, but the response was cold, with sarcasm calling it ‘no value’ rather than ‘value up’ due to the insufficient results that did not meet the expectations of the market and investors.
As the Value Up Index, which was created to resolve the undervaluation of the domestic stock market and raise the low corporate value of listed companies, contrary to expectations, controversy over ambiguous selection criteria and fairness of constituent stocks arose, the exchange clearly looked embarrassed. When Jeong Eun-bo, chairman of the exchange, took office in February of this year, he prioritized supporting value growth as his top priority. The exchange formed a task force (TF) and established guidelines for public disclosure of corporate value improvement plans. In addition, the company took proactive steps by meeting with major listed companies and foreign securities firms to encourage participation in the Value Up Program.
However, the value up index released by the exchange for the first time in 7 months leaves much to be desired. The Value Up Index, which was supposed to fairly select stocks through five-stage screening, has failed to live up to its original purpose and appears to have lost its direction. The Value Up Index, which consists of 100 stocks, defeated the purpose of its introduction as representative financial stocks such as KB Financial Group, which were active in announcing plans to improve corporate value, and undervalued high dividend stocks were excluded, and many companies that were stingy with shareholder returns, which aroused investor resentment, were included.
SK Hynix, which failed to meet profitability, was included in the index through a ‘special system’ due to its market influence, which was criticized as a ‘rubber band standard’ that violated principles. At the time of the index announcement, there was no explanation regarding the special requirements for inclusion, but as the controversy grew, the exchange’s amateurish response to a belated explanation increased market suspicion and eroded trust. The exchange is said to have differentiated itself by introducing qualitative requirements and a proportional ceiling system, but the response is that it is difficult to find a clear color for the value industry because the stocks are already included in the KOSPI 200 and KOSDAQ 150.
It is understandable that there may have been difficulties in selecting the first stock due to the low participation rate in value industry disclosure by companies, which is the basis for future-oriented judgment. However, the exchange’s lax preparation and policy loopholes have largely contributed to the confusion in the market with vague indices that do not represent growth potential and current market conditions due to reliance on past-oriented data.
You can’t fill up after the first drink. Although the index has lost steam due to various controversies since its launch, the value increase must continue. The exchange also acknowledged that its perspective on the index was different from the market and immediately reflected the market’s opinion, leaving open the possibility of changing the constituents within the year. It is positive that the company has shown its will to tightly manage the value-up index.
Currently, the Exchange Value Up Support Department is actively communicating with asset management companies ahead of the launch of an exchange-traded fund (ETF) based on the Value Up index early next month. In addition, two practical training sessions on value-up disclosure were recently conducted for corporate disclosure managers, and it is said that more companies than expected showed interest. The exchange provides counseling on the difficulties companies face in the process of preparing for public announcements and also discusses institutional support. Large companies are preparing for fourth quarter disclosures, and the number of companies making announcements is expected to increase within the year. Therefore, it is highly likely that a significant number of publicly announced companies will change their stocks during regular rebalancing in June next year rather than this year.
It is desirable for the exchange to reflect industry opinions before the ETF is launched and ensure the stability of the index so that there are no disruptions in commercialization. Above all, the extent to which companies actually carry out value-up activities, such as active shareholder returns, in accordance with corporate value improvement plans should be reflected in the value-up items and considered as an important factor.
The ultimate goal of the Value Up Index is to ‘level up’ the capital market by enabling companies to continuously communicate with investors and improve trust. Companies should strive to increase their own value by strengthening shareholder returns, enhancing competitiveness, and improving their fundamentals, and exchanges should encourage voluntary participation of listed companies through fair and transparent indices and consistent policy support. In the long term, we hope that the Value Up Program will be trusted by investors and serve as a catalyst for a leap forward in the domestic stock market that can secure new momentum.
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Source: www.newsis.com
