Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

Korea Stock Exchange Kospi Index / Event-Driven

<ul>
<li>A new tax support framework for Korea's value-up policy was introduced, but local markets argue that proportionate protection for minority shareholders is crucial for a significant market value increase.</li>
<li>Korean political leaders are united in supporting this amendment to the Commercial Act, with recent events increasing the likelihood of bipartisan support for this crucial change.</li>
<li>Given the administration's commitment to the value-up and recent negative sentiment towards recent restructurings at Doosan and SK, there's growing potential for minority shareholder protection to take root in Korea.</li>
</ul>


A new tax support framework for Korea's value-up policy was introduced, but local markets argue that proportionate protection for minority shareholders is crucial for a significant market value increase.
Korean political leaders are united in supporting this amendment to the Commercial Act, with recent events increasing the likelihood of bipartisan support for this crucial change.
Given the administration's commitment to the value-up and recent negative sentiment towards recent restructurings at Doosan and SK, there's growing potential for minority shareholder protection to take root in Korea.


Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

<ul>
<li>The highest dividend tax rate drops from 49.5% to 25%, leading the local capital market to view the reform as more shareholder-focused than company-focused.</li>
<li>The top inheritance tax rate drops from the 60% range to 40%, a meaningful reduction for conglomerates like Hyundai and Hanwha, though below initial expectations.</li>
<li>Tax incentives in the reform are less aggressive than expected, with modest corporate and inheritance tax cuts. However, this compromise increases the likelihood of its passage, boosting short-term market expectations.</li>
</ul>


The highest dividend tax rate drops from 49.5% to 25%, leading the local capital market to view the reform as more shareholder-focused than company-focused.
The top inheritance tax rate drops from the 60% range to 40%, a meaningful reduction for conglomerates like Hyundai and Hanwha, though below initial expectations.
Tax incentives in the reform are less aggressive than expected, with modest corporate and inheritance tax cuts. However, this compromise increases the likelihood of its passage, boosting short-term market expectations.


Overall Assessment of the Value-Up Policy-Related Aspects of the Tax Reform Plan Released Today

<ul>
<li>MMAS prioritizes dividends over low-PBR, key to government's Value-up momentum. Despite initial market disappointment, dividend stocks rebounded, underscoring continued investor interest.</li>
<li>Government officials are collecting historic dividend data to simulate separate taxation impact of dividend income, likely to be included in July's tax reform bill for National Assembly approval.</li>
<li>Local institutions focus on dividend-centric Value-up trading, targeting stocks with high cash reserves and dividends. Strategy needed to manage market impact pre-tax reform bill in July.</li>
</ul>


MMAS prioritizes dividends over low-PBR, key to government's Value-up momentum. Despite initial market disappointment, dividend stocks rebounded, underscoring continued investor interest.
Government officials are collecting historic dividend data to simulate separate taxation impact of dividend income, likely to be included in July's tax reform bill for National Assembly approval.
Local institutions focus on dividend-centric Value-up trading, targeting stocks with high cash reserves and dividends. Strategy needed to manage market impact pre-tax reform bill in July.


Local Institutions' Value-Up Momentum Moves: Watch the July Tax Reform Bill

<ul>
<li>Today, NPS made the final decision to introduce a reference portfolio. The critical point is the increase in risky assets from 56% to 65%, also decided at today's meeting.</li>
<li>Initially, overseas equity was prioritized, but recent forecasts suggest significant potential in increasing local equity, aligning with the value-up policy.</li>
<li>Monitoring NPS's execution plan, including allocation and timing by asset class, is vital to gauge inflow size, especially for Value-up beneficiaries.</li>
</ul>


Today, NPS made the final decision to introduce a reference portfolio. The critical point is the increase in risky assets from 56% to 65%, also decided at today's meeting.
Initially, overseas equity was prioritized, but recent forecasts suggest significant potential in increasing local equity, aligning with the value-up policy.
Monitoring NPS's execution plan, including allocation and timing by asset class, is vital to gauge inflow size, especially for Value-up beneficiaries.


NPS Confirms Reference Portfolio & Risky Assets Upweight: Implications for Value-Up Stocks

<ul>
<li>The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.</li>
<li>The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.</li>
<li>The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.</li>
</ul>


The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.
The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.
The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.


KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

South Korea

The KOSPI Index is a capitalization-weighted index of all common shares on the Korean Stock Exchanges. The Index was developed with a base value of 100 as of January 4, 1980. Note: The preferred shares are excluded in calculating the KOSPI Index from June 14, 2002. 

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

As the financial authorities are pushing forward with a corporate value-up program, the Democratic Party of Korea (DPK), the majority party in the...

Sanghyun Park

Local Institutions' Value-Up Momentum Moves: Watch the July Tax Reform Bill

This post delves into local institutions' focus on dividends over low-PBR in Value-up momentum trading, with anticipation surrounding the July tax...

Sanghyun Park

NPS Confirms Reference Portfolio & Risky Assets Upweight: Implications for Value-Up Stocks

This post outlines Korea NPS's decision to adopt the reference portfolio, raising risky assets allocation weight by 9%p to 65%, and its...

Sanghyun Park

KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

This post examines KRX's plan to integrate KOSPI and KOSDAQ into a tiered system based on promotion and demotion, similar to Japan's, and discusses...

Sanghyun Park

Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

As the financial authorities are pushing forward with a corporate value-up program, the Democratic Party of Korea (DPK), the majority party in the...

Sanghyun Park

Overall Assessment of the Value-Up Policy-Related Aspects of the Tax Reform Plan Released Today

This post provides an overall assessment of the value-up policy-related aspects of Korea's tax reform plan released today.

Sanghyun Park

Local Institutions' Value-Up Momentum Moves: Watch the July Tax Reform Bill

This post delves into local institutions' focus on dividends over low-PBR in Value-up momentum trading, with anticipation surrounding the July tax...

Sanghyun Park

NPS Confirms Reference Portfolio & Risky Assets Upweight: Implications for Value-Up Stocks

This post outlines Korea NPS's decision to adopt the reference portfolio, raising risky assets allocation weight by 9%p to 65%, and its...

Sanghyun Park

KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

This post examines KRX's plan to integrate KOSPI and KOSDAQ into a tiered system based on promotion and demotion, similar to Japan's, and discusses...

Sanghyun Park