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🇰🇷 South Korea /Economy & Trade

South Korea to Name Low-Valuation 'Low PBR' Companies Starting November

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Official statement New plan
  • South Korea will publicly list companies with low Price-to-Book ratios (PBR) starting November 2nd.
  • Approximately 120-220 companies are expected to be identified as having low PBR, based on industry averages over the past three years.
  • This initiative aims to encourage companies to improve their valuations and boost the capital market, with exceptions for firms disclosing value enhancement plans.

South Korea is set to publicly identify companies with low Price-to-Book ratios (PBR) starting November 2nd, a move aimed at revitalizing the stock market. This initiative will see approximately 120 to 220 listed companies on the KOSPI and KOSDAQ exchanges flagged for their low valuations relative to their net assets.

Starting November 2nd, the list of listed companies with low price-to-book ratios will be publicly disclosed for the first time.

Announcing the implementation date and nature of the policy.

The Financial Services Commission (FSC) has outlined the criteria for identifying these companies. Firms will be categorized into 11 industry sectors, and those consistently falling within the bottom 25% of PBR for KOSPI or the bottom 10% for KOSDAQ over the last three years will be subject to public disclosure.

Approximately 120 to 220 KOSPI and KOSDAQ listed companies are estimated to be designated as having low PBR.

Providing an estimate of the number of affected companies.

This policy intends to pressure companies to address their undervaluation, which critics argue is sometimes maintained to reduce inheritance and gift taxes for major shareholders. By publicizing these low PBR firms, the FSC hopes to encourage them to implement strategies for value enhancement, thereby boosting overall market activity.

Companies that disclose a corporate value enhancement plan will be granted a one-year exemption from disclosure.

Explaining the incentive for companies to improve their value.

However, companies that disclose a clear plan for improving their corporate value will be granted a one-year exemption from public disclosure. This grace period is designed to incentivize proactive measures from businesses. Nonetheless, companies that repeatedly meet the low PBR criteria for six consecutive years will not be eligible for this exemption, ensuring that persistent undervaluation is addressed. The first list of these companies will be released on the Korea Exchange's disclosure website, and their stock names on brokerage apps will be marked with a 'low PBR' indicator.

Companies that fail to meet the disclosure criteria for six consecutive years will be included in the list without exemption.

Detailing the consequences for persistent low valuation.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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