Value context and insight. lkm@koreatimes.co.kr
Financial group shares soar amid Lee’s drive to protect minority shareholders
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By Lee Kyung-min
Shares of the country’s leading financial groups are extending their weeks of rally, buoyed by President Lee Jae-myung’s pledge to strengthen minority shareholder rights and enhance corporate values, market watchers said Tuesday.
The two are part of an overarching drive, best encapsulated by the revision to the Commercial Act, one of Lee’s major campaign pledges. The ruling Democratic Party of Korea (DPK) is fully backing the move.
The DPK-majority National Assembly is expected to pass the long-stalled, politically divisive revision during a plenary session as early as Thursday.
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According to financial market data, Korea’s four leading financial firms surged as much as 10 percent last week alone. KB led the rally with a gain of over 9 percent. Shinhan, Hana and Woori gained about 6 percent each.
KB hit an intraday high of 114,800 won ($84), Tuesday. Woori, Shinhan and Hana also registered intraday highs of 21,100 won, 60,500 won and 80,800 won, respectively.
Market consensus is that the shares are set for further gains.
Global investors and asset managers, including Aberdeen Investment and Franklin Templeton, have recently upgraded to “overweight” Korean equities, meaning that they recommend an increase in holdings of Korean stocks.
Many local brokerages say the financial group shares will be among the first to benefit from the passage of the revision, due mostly to enhanced shareholder return policies.
“Financial groups will rush to retire treasury shares for cancellation and increase dividends,” a Korea Investment and Securities report said.
Lee has said the passage will take place “within two to three weeks” of his inauguration.
The divisive revision seeks to overhaul corporate governance, long skewed in favor of Korea’s family-controlled chaebols and top executives of private firms.
However, opposition from businesses is equally strong, since minority shareholders can file an excessive number of frivolous lawsuits, emboldened by the revision. This could undermine management efficiency and speedy decision-making.
Overall, the passage will help reduce the “Korea discount,” a chronic undervaluation of Korean stocks.