(Bloomberg) -- Korea’s new Value-Up Index will comprise 100 stocks, including nation’s biggest chipmakers Samsung Electronics Co., SK Hynix Inc. and automaker Hyundai Motor Co., according to the securities exchange operator.
Information technology and industrials dominate the gauge, with 24 and 20 companies, respectively, as they best reflect the country’s economy and business landscape, according to Korea Exchange. Selection criteria included factors such as profitability, payout ratios and capital efficiency.
The index and the release of related financial products may provide new impetus to the “Corporate Value-Up Program” announced in February. The plan is a key plank of the government’s push for better corporate governance and improved shareholder returns.
“Despite sustained quantitative growth, our stock market has been criticized for not properly valuing companies due to corporate governance issues and lack of shareholder-centered management,” Korea Exchange CEO Jeong Eun-bo said in a statement. “We look forward to a revaluation of our stock market.”
The gauge will be launched on Sept. 30, and index futures and ETF products will be added in November, according to the exchange. As many as 67 firms, including Shinhan Financial Group and Celltrion Inc., are from the benchmark Kospi Index.
The market reaction to the index’s new members was mixed, with some analysts expressing surprise at the inclusion of Samsung Electronics, given that the chipmaker is not undervalued relative to its peers.
“What’s immediately noticeable is that KB Financial and Hana Financial are missing from the banking sector,” said Sanghyun Park, an analyst at Clepsydra Capital, who publishes on platform Smartkarma. “It is somewhat surprising to see Samsung Electronics included.”
The index focuses on future growth potential rather than just high-yielding stocks, which may explain why some banks were excluded, according to Park So-yeon, an analyst at Shinyoung Securities. “The index is attractive because it’s differentiated from other gauges, yet what’s important is how much will the institutions use it,” she said.
The Kospi has lost almost 1% in 2024 after a strong start to the year, as initial optimism over the campaign cooled. President Yoon Suk Yeol has been keen on resolving the so-called “Korea Discount,” as part of efforts to narrow the wealth gap and stimulate growth.
--With assistance from Winnie Hsu.
(Updates with analyst comment in seventh paragraph. A previous version corrected size of Kospi’s year-to-date drop in final paragraph.)
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