[Initial Moment] The True Value-Up Starts Now

Concerns Arise Over Loss of Momentum for Value-Up Program Following Ruling Party's General Election Defeat
Value-Up Is Not a Policy to Ease Corporate Operations
Recognizing Shareholder Rights Is Key to Restoring Trust in the Korean Market
Resolving Korea Discount Is a Bipartisan Goal

The 22nd National Assembly election was held, and the ruling party suffered a crushing defeat. The securities industry is busy forecasting the stock market outlook. Most analysts, based on past experience, argue that the general election results have little to no impact on stock prices. However, this election result may differ slightly in that it could influence the pace of the government's ongoing Value-Up program.

The key point to watch after the general election is whether the current administration can secure continuity in policies aimed at resolving the Korea Discount. The combination of a minority ruling party and a lame-duck period could weaken the government's policy-driving power. The government's major tasks for capital market advancement include abolishing the Financial Investment Income Tax (FIIT), expanding tax benefits for Individual Savings Accounts (ISA), improving dividend procedures, and incentivizing treasury stock cancellation, all of which require amendments to tax law, commercial law, and capital market law. Among these, there are disagreements between the ruling and opposition parties regarding corporate tax and FIIT.

Many media outlets lament that the core of the much-anticipated Value-Up program in the market is tax law reform, and that securing enough seats for legislative amendments has become difficult due to the opposition's overwhelming victory. The argument is that since the core driving forces of the Value-Up program lie in dividend tax improvements and easing inheritance tax burdens, the increase in opposition seats, which are negative toward tax cuts, will weaken the program's effectiveness.

Tax issues can be seen as one of the factors contributing to the Korea Discount. However, this is only an immediate and superficial reason; the more fundamental cause lies in the longstanding distrust of Korean companies and the financial and investment markets. Resolving the Korea Discount means restoring trust that investors’ rights will be protected when entering the Korean market. This is a national task and a long-term project beyond party lines. Even if there are some differences in execution methods between parties, the ultimate direction and goal can be said to be the same.

The Value-Up program should not be a policy that makes it easier for major shareholders to run companies, but rather a policy that properly treats shareholders as the true owners of the company. It is a path away from a backward capital market where only controlling shareholders are treated as shareholders, toward an advanced capital market that properly guarantees the rights of ordinary shareholders. This path can be walked with the support and applause of all, regardless of political affiliation.

Another important aspect of restoring investor trust is consistency in financial investment policy. The Value-Up program must demonstrate that it is a sincere and steadfast policy, not a seasonal policy aimed at winning votes during election periods. Financial investment policies have historically been hastily made and discarded according to political interests. When news broke earlier this year that the government was pushing the Value-Up program to resolve the Korea Discount, inquiries from foreign investors flooded domestic institutional investors, asset management companies, and hedge fund representatives. This shows the high expectations and interest foreign investors had in the government's Value-Up policy. Whether this Value-Up policy continues will be a crucial turning point testing the trust of foreign investors and the market, who harbor doubts about the consistency and sincerity of Korea’s financial investment policies.