Value-up index enlists 100 ‘best practice’ companies

Big-name shares Samsung, SK hynix, Hyundai Motor, Mirae Asset, Shinhan and Woori listed

Korea Exchange CEO Jeong Eun-bo speaks at a press event held at the bourse operator’s headquarters in Yeouido, western Seoul on Tuesday. (Yonhap)

The Korea Value-up Index, the key component of the government’s push to boost corporate value and address the “Korea Discount,” is to enlist 100 companies, including Samsung Electronics, Hyundai Motor and Mirae Asset Securities, according to the bourse operator Korea Exchange.

On Tuesday, the Korea Exchange released the details on the value-up index, a stock index comprising "best practice" Korean companies complying with the corporate value-up program. The initiative, released earlier this year, includes a set of measures to promote the corporate growth of listed companies.

“Despite the quantitative growth, the local stock market has been criticized for being undervalued because of the governance and shareholder return issues (of listed companies). The local bourse can be reevaluated with the release of the value-up index,” Korea Exchange CEO Jeong Eun-bo said at a press event held at the bourse operator’s headquarters in Yeouido, western Seoul.

The Value-up Index will have 100 constituents with a base value of 1,000, encompassing 67 companies listed on the benchmark Kospi and 33 on the secondary bourse Kosdaq.

Blue-chip stocks such as Samsung Electronics, SK hynix, Hyundai Motor and Celltrion have been listed, as well as the shares of major finance firms, including Mirae Asset Securities, Shinhan Financial Group and Woori Financial Group.

Yet, KB Financial Group and KT, heavyweights in the banking and communication sectors, respectively, were not listed.

The components were selected through a five-stage screening process based on factors such as market cap, dividend payouts, earnings, price-to-book value and return on equity rankings, according to the operator.

Companies that released their plan to boost their corporate value by Monday were considered for a special inclusion on the index, as long as they met the minimum requirements such as profitability, market cap, and liquidity. The inclusion will last two years.

The value-up index will be capitalization-weighted, meaning individual components’ influence will be based on market capitalization. There will be a 15 percent limit on the maximum weight of a single component. The top 10 constituents take up 67 percent of the total market cap for the index. The index will be rebalanced every June.

The index will be available from next Monday. Index futures will be listed on Nov. 4. Exchange-traded funds that track the index will be listed in early November. The exchange operator said it will develop more follow-up indices with the value-up index as their core.

Though the market has shown a lukewarm response to the government-led value-up program, Jeong said it is "too early" to evaluate the directive.

“Following higher expectations from retail investors and improvement demands on the corporate governance from activist funds raised across the world, including Korea, companies will continue to make efforts to protect minority shareholders. The value-up program can be the opportunity to boost the move,” Jeong said.

By Im Eun-byel(silverstar@heraldcorp.com)