Korea Value-up Index to begin publication next week

The Korea Exchange unveiled the composition of the Value-up Index, part of a government initiative to resolve the "Korea discount" of undervalued domestic stocks.

Korea Exchange CEO Jeong Eun-bo speaks during a press briefing at the KRX office building in western Seoul on Tuesday. [YONHAP]

The Korea Exchange (KRX), the country’s bourse operator, unveiled details of the Korea Value-up Index comprising 100 stocks on Tuesday.

The index was designed by the KRX and the government to resolve the chronic undervaluation of domestic stocks, a phenomenon dubbed the "Korea discount,” as part of the broader Corporate Value-up initiative.

The Korea Value-up Index will begin publication on Sept. 30.

The gauge tracks the movement of 100 stocks — 67 companies trading on the benchmark Kospi and 33 on the secondary Kosdaq bourse — including Samsung Electronics, SK hynix, Hyundai Motor, Celltrion, Korean Air, Shinhan Financial Group, Woori Financial Group, Mirae Asset Securities and Kiwoom Securities. Kospi-listed stocks represent 95.3 percent of the index's total market capitalization.

The companies were selected based on market cap, profitability, shareholder return performance, price-to-book ratio and return on equity, according to the KRX.

Unlike the previous projection by the market that the index would mainly consist of financial stocks, which have been actively participating in the value-up program with shareholder return improvement plans, stocks tracked by the index include 24 tech companies, 20 industrial goods producers, 11 consumer goods suppliers and 10 financial and real estate firms, among others.

The KRX said that “the index consists of key stocks across all industries, appropriately representing the Korean economic and industrial structure.”

With a base index of 1,000 points and the reference date set at Jan. 2, 2024, the Korea Value-up Index weighs stocks based on their floating market capitalization within a maximum 15 percent cap. The included stocks will be adjusted once every year.

The index's futures and exchange-traded fund will begin trading in November.

According to a KRX simulation, the index performed better than other key indices over the past year, with a return rate of 12.5 percent, surpassing the 4.3 percent of the Kospi 200 and 4.9 percent of the KRX 300.

"Despite quantitative growth, there have been criticisms pointing out that the Korean stock market has been unable to reflect the value of companies due to concerns over growth potential and the concentrated control of major shareholders [in terms of management practice],” said KRX CEO Jeong Eun-bo during a press briefing at the KRX office building in western Seoul on Tuesday.

"We hope the introduction of the Korea Value-up Index will serve as an opportunity for the government-led Corporate Value-up program to further expand in scale and for the domestic stock market to be reevaluated by removing the imbalance of information among investors.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]