DP's strong contender vows transparency in corporate governance, improved monitoring system to build market trust
Liberal presidential front-runner Rep. Lee Jae-myung vowed Monday to usher in a new era free from the so-called "Korea discount," pledging to double the nation's benchmark Kospi index to surpass 5,000 points if elected.
Lee said Monday that his market reform push could put an end to the long-standing phenomenon of South Korean stock undervaluation due to weaknesses in corporate governance and a lack of market transparency, known as the "Korea Discount." He added that enhancing minority shareholder protection, addressing opacity in the stock market and establishing a system for fair assessment of listed companies are prerequisites for his goal of attracting more capital to the stock market.
Lee, who chaired the Democratic Party of Korea until he declared his presidential bid earlier this month, previously lost to Yoon Suk Yeol, then a political rookie, in the 2022 presidential election and is now jockeying for the Democratic Party's presidential nomination.
“If we establish a fair and reasonable corporate governance mechanism and market order, our stock market will take a stunning leap forward,” Lee said in a Facebook post Monday.
“We will make the era of ‘Kospi 5,000’ come true with South Korea’s resilience and growth."
Lee did not elaborate on the time frame for the Kospi's projected passing of the 5,000-point mark on Monday, as the Kospi -- whose combined market cap of 849 companies stands at over 2,000 trillion won ($1.4 trillion) -- closed at around 2,488.42 points Monday.
His campaign promise suggested the total valuation of all listed companies on the Korea Exchange's main board could double if he wins the presidential election in June and serves his term until June 2030.
Laying out the financial market-related election campaign pledge, Lee expressed regret over South Koreans' investment tendency to overallocate real estate in their asset portfolio and to prefer foreign stocks over domestic stocks.
"Boosting South Korea's stock market is the easiest way possible to increase people's assets considerably," said the two-term lawmaker.
Lee pledged zero tolerance against white-collar crimes such as stock manipulation or other unfair practices on the stock market. He also vowed to strengthen policies to confiscate criminal proceeds from such unfair practices, as well as a monitoring system to prevent stock manipulation.
"South Korea's stock market has suffered deep-rooted distrust," Lee said, claiming there are prevailing thoughts that those who make money by manipulating stock prices will not be punished if they have power.
During his meeting with stock analysts at the headquarters of the Korea Financial Investment Association later on Monday, Lee said he would work to pass the revision of the Commercial Act to better protect small shareholder's rights, including measures to mandate a corporate boardroom's fiduciary duty in accordance with the interest of all of its shareholders, if elected president.
The bill, sponsored by the Democratic Party, failed on Thursday to override a veto by acting President and Prime Minister Han Duck-soo.
Also, during his meeting with stock analysts, Lee said South Korean stocks lacked in dividend payments to shareholders. He additionally raised a need to dissolve companies whose price-to-book ratio stands below 1.0.
The persisting undervaluation of South Korean stocks was a headache for the Yoon Suk Yeol administration, as Seoul mapped out an initiative to launch a "Value-up Index" to boost market transparency that bore little fruit.
Since the Korea Value-up Index initiative began in late September, the Kospi has fallen more than 4 percent in nearly seven months.
consnow@heraldcorp.com
