Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
KOFIA chief vows to prioritize resolving 'Korea discount'
Korea Financial Investment Association (KOFIA) Chairman Seo Yoo-seok speaks during a press conference at the headquarters of the KOFIA in Seoul, Tuesday. Courtesy of KOFIA
By Anna J. Park
Korea Financial Investment Association (KOFIA) Chairman Seo Yoo-seok emphasized that the investment association's top priority for this year is to resolve the "Korea discount," referring to the overal undervaluation of korean-listed companies.
During a New Year's press conference held at the headquarters of the KOFIA in Seoul's financial district of Yeouido on Tuesday, Seo stressed that it's time to resolve the chronic issue of the Korea discount.
"First and foremost, the KOFIA will put its utmost efforts to resolve the Korea discount, which has long persisted, wreaking havoc on the domestic stock markets," Seo said.
The KOFIA head went on to express the Korean investment industries' gratitude for President Yoon Suk Yeol, who underscored the government's determination to get rid of the Korea discount issue during his attendance at the New Year's stock market opening ceremony earlier this month.
"The investment association will draw up measures to raise the Korean capital market's valuation, including measures that induce listed companies' improved dividend payout ratio and enhanced shareholder return policies, like share buybacks and retirement," Seo said.
The KOFIA chief also pledges that the association will actively propose to the government tax incentives for long-term stock investments, both direct and indirect, such as public stock funds. He emphasized that the tax incentives on the capital market will function as a productive stimulus that not only resolves the Korea discount but also generates a more significant impact on the public's asset formation and corporate growth.
According to Seo, the number of stock investors in Korea has been increasing every year, rising from 5.05 million at the end of 2017 to 14.41 million at the end of 2022.
"When we include funds, various investment products, and pension products altogether, almost everyone in the country can be considered directly or indirectly participating in the capital market. Thus, it won't be an exaggeration to say that capital market policies are the primary focus of the public," he said.
Korea Financial Investment Association (KOFIA) Chairman Seo Yoo-seok speaks during a press conference at the headquarters of the KOFIA in Seoul, Tuesday. Courtesy of KOFIA
To effectively solve the Korea discount, Seo called for changes in the pension market as well, saying that Korea's pension income replacement rate, the ratio of retirement income to preretirement earnings, stands at approximately 43 percent, which is the lowest among the OECD countries.
"It is necessary to create the virtuous circle of the Korean capital market by improving the profitability of private pensions to share the burden of the public's income after retirement, which can simultaneously address the problems of the Korea discount as well as shortfalls of public pensions," he explained.
The head of the domestic investment sector also said the industries will continue to push forward to introduce a business development company (BDC), which is a type of public fund that invests in small- and medium-sized companies as well as distressed companies. The introduction of the BDC will allow a more stable capital supply to venture capital markets.
Meanwhile, Seo points out that retail investors in Korea still shy away from investing in bonds, although the net purchase amount of bonds by Korean individual investors increased more than eightfold to 37.6 trillion won ($28.1) last year, from 4.5 trillion won in 2021.
"When compared to other developed countries, Korea still has a disproportionately high proportion of savings deposits," he said, accentuating the need to support bond investors with long-term investment incentives.