"Kospi rally driven by improved trust, competitiveness of key industries"

"Samsung Electronics, SK Hynix forward PER below 7-8x; Micron's exceeds 10x"

Korea Exchange Chairman Jeong Eun-bo speaks at a press briefing hosted by the Seoul Foreign Correspondents' Club. [Korea Exchange]
Korea Exchange Chairman Jeong Eun-bo speaks at a press briefing hosted by the Seoul Foreign Correspondents' Club. [Korea Exchange]

Korea Exchange Chairman Jeong Eun-bo said Monday that the domestic stock market has resolved a significant portion of the Korea discount.

Speaking at a press briefing hosted by the Seoul Foreign Correspondents' Club at the Press Center in Jung-gu, Seoul, Jeong said the Kospi rose about 80 percent last year and has gained more than 100 percent so far this year.

He attributed the gains to two main factors: efforts to build investor trust in the capital markets, and the international competitiveness of South Korea's key industries.

Jeong cited the corporate value-up program as a driver of domestic investor confidence and said foreign investors had also begun to take notice. "I believe the government's visible efforts have naturally created an opportunity to secure investor trust in the Korean capital market," he said.

He also pointed to Japan as a reference case, noting that financial assets overtook real estate in Japanese household wealth in the early 2020s. "In Korea, real estate still accounts for 65 percent of household assets and financial assets about 35 percent as of 2024," he said. "Over the medium to long term, I expect Korea will follow a similar path to Japan, with those proportions eventually reversing" — a shift he said bodes well for the financial market.

Jeong said the exchange is pursuing several initiatives, including delisting insolvent companies, banning dual listings in principle, cracking down on unfair trading and improving liquidity access for foreign investors. He said the exchange is putting particular effort into enabling direct investment by foreign investors through omnibus accounts and expanding English-language corporate disclosures, adding that English filings will be mandatory for all Kospi-listed companies by next year.

On South Korea's potential inclusion in the MSCI Developed Markets Index, Jeong said the exchange has worked hard to improve foreign investor access to the domestic market and that MSCI has responded positively. "However, my understanding is that MSCI still sees constraints related to the launch of 24-hour foreign exchange trading, which is set to begin next month," he said.

Asked whether the semiconductor-driven rally amounted to speculation, Jeong drew a clear line. "I think it would be difficult to characterize it as speculation," he said. SK Hynix closed nearly 6 percent higher on Monday, surpassing Samsung Electronics to become the largest company on the Kospi by market capitalization.

Jeong said Samsung Electronics and SK Hynix are trading at forward price-to-earnings ratios below 7 to 8 times based on expected earnings this year, while US rival Micron's exceeds 10 times. "Given that the market capitalization of Samsung Electronics and SK Hynix each exceeds 2,000 trillion won ($1.44 trillion), and that there are more than 5 million investors, I do not think the current trading situation is abnormal," he said.

On the concentration of market activity in the two stocks, Jeong acknowledged the skew but placed it in a global context. "It is true that there is concentration," he said. "But in Taiwan, TSMC accounts for more than 50 percent of market capitalization, and in the Netherlands, ASML makes up the bulk of the stock market." He said the concentration reflects a natural price-discovery process driven by supply and demand, and pledged continued efforts to nurture industries beyond semiconductors through productive finance.

On market volatility, Jeong said South Korea's economy is more dependent on external conditions than most major economies, and that higher volatility is partly a structural feature of its memory chip-centered economic base. He added that the government is working on institutional and market-management measures to smooth out such fluctuations.

On the National Pension Service's rebalancing of its domestic equity allocation target, Jeong said he expects the fund to make a wise decision that balances the pension's long-term sustainability with its role in the domestic capital market.


forest@heraldcorp.com