The Korea Exchange (KRX) has introduced the Korea Value-Up Index, part of the government’s initiative to address the “Korea Discount,” a persistent issue in the undervaluation of South Korean stocks. The new index, comprising 100 companies selected based on profitability and shareholder returns, will begin real-time calculation on September 30, with index futures and exchange-traded funds (ETFs) to be listed in November. The index’s base value is set at 1,000 points, effective from January 2, 2024.
The Korea Value-Up Index aims to attract large-scale investments by addressing liquidity concerns and encouraging corporate transparency. Weights are based on free-float market capitalization, capped at 15% for individual stocks, ensuring a balanced distribution across industries such as finance, automotive, and biotech.
The initiative is a strategic response to long-standing factors contributing to the Korea Discount, including corporate governance issues and market inefficiencies. However, market analysts view the index’s immediate impact as neutral, noting that much of the anticipation has already been factored into stock prices. Nonetheless, the index is seen as a positive medium- to long-term development for the market.
Future plans include launching indices targeting undervalued smaller companies, with pension fund participation seen as critical to the index’s success.
