What's next after Korea's market rally?

Korea's stock market has already delivered strong gains. The harder part may be turning the rally into a lasting rerating.

Global investors said at Korea Premium Week 2026 on Monday that doing so will require deeper changes to corporate governance, shareholder returns and taxation, along with consistent and transparent market rules.

Frank Carroll, managing director at Oaktree Capital, warned regulators against abrupt interventions when markets turn volatile, arguing that policy consistency will be crucial to maintaining foreign investor confidence.

"There will be a market correction, most likely driven by America," said Carroll, who has been investing in Korea since 1992. "When that correction comes, don't panic. Stay the course."

He pointed to Korea's history of short-selling bans as an example of the type of intervention that risks undermining confidence in the market.

"I don't believe in bans. I believe in consistency," Carroll said. "Short sellers aren't evil. People selling stocks in down markets aren't evil. That's what an open, free market is all about."

Carroll also urged policymakers to broaden the impact of reforms beyond sectors that have already benefited from the rally, helping capital rotate into other undervalued parts of the market.

Winnie Kwan, PIO at Capital Group, said tax reform should be among the next priorities. Korea's dividend tax rate can reach as high as 45 percent, which Kwan said discourages large shareholders from supporting higher payouts.

She also called for changes to inheritance taxes and stronger corporate boards, with more industry experts and financial professionals serving as directors.

Capital Group, which has invested in Korea since the 1990s, currently has about $70 billion invested in the country.

Kwan pointed to Korean banks as evidence that changes in corporate behavior can result in higher valuations.

"The main message here for banks is to stay the course," Kwan said, adding that banks that have raised return on equity to between 10 percent and 12 percent have seen a "well-deserved" rerating.

She cited KB Financial Group, recalling a meeting with senior management in the spring of 2025 in which executives demonstrated what she described as an "unwavering commitment to shareholder returns and rational competition." Capital Group subsequently increased its stake in the lender, she said, even during the market downturn.

Kwan sees semiconductors as another area ripe for change. She described the industry as entering a "golden age" driven by artificial intelligence and said stronger free cash flow should lead to more ambitious shareholder returns.

Capital Group wants Korean chipmakers to commit to returning more than 50 percent of free cash flow to shareholders through regular and special dividends and share buybacks, Kwan said. Repurchased shares should generally be canceled unless they are used for employee compensation, she added.

Kwan also called for annual rather than multi-year shareholder return commitments, and urged Samsung Electronics and SK hynix to provide clearer frameworks for future capital spending, balance sheet targets and other major uses of cash.

The push comes as Korea competes for capital in increasingly fluid global markets, said Joud Abdel Majeid, co-head of the Global Partners Office at BlackRock. She said investors are moving money across countries, sectors and asset classes with increasing speed.

"Which is why the market reforms currently underway in Korea matter so much," she said. "Korea has an opportunity to build capital markets that match the strength, sophistication and global competitiveness of the economy it has already built."