[Exclusive] What Will Be Included in 'Seo Yuseok's' KOFIA Value-Up... First Seminar at the End of May

Listening to Success Factors for Value-Up with Japanese Experts Invited
Future Policy Recommendations Likely to Focus on Pensions and Taxation

The Korea Financial Investment Association's 'Capital Market Value-Up Task Force (TF)', launched in March, will hold its first seminar at the end of May. The photo shows Seo Yu-seok, Chairman of the Korea Financial Investment Association, delivering the keynote speech at the seminar on "Strengthening the Global Competitiveness of the Financial Investment Industry" held at the Korea Exchange on the 14th. Photo by Korea Financial Investment Association

The 'Capital Market Value-Up Task Force (TF)' of the Korea Financial Investment Association (KOFIA), launched last March, will hold its first seminar at the end of May. This is the first official event of the TF, which was directly created by KOFIA Chairman Seo Yu-seok to resolve the Korea Discount (the undervaluation phenomenon of the Korean stock market).

According to the financial investment industry on the 16th, KOFIA's Capital Market Value-Up TF plans to hold its first seminar on May 28 at the Conrad Hotel in Yeouido, Seoul. The seminar is expected to be attended by CEOs of financial investment firms, financial authorities, the National Assembly, securities-related organizations, media, academia, and other relevant experts. A Japanese expert will attend in person to explain the success factors of Japan’s value-up policies. Along with introducing value-up measures for the Korean capital market, a discussion on policy recommendations will also be held. Chairman Seo Yu-seok of KOFIA said, "This seminar will be an opportunity to learn what the success factors of corporate value-up in Japan are."

KOFIA’s Capital Market Value-Up TF was established in March. Executive Director Lee Chang-hwa serves as the TF leader, with many executives and staff, including Manager Heo Wook, joining the TF. While the 'Value-Up Advisory Group,' led by the Financial Services Commission, Financial Supervisory Service, major pension funds, and Korea Exchange, focused on encouraging listed companies to voluntarily improve their governance, KOFIA’s TF concentrates on exploring policies for the overall development of the capital market.

It is expected that the tasks to be promoted by KOFIA’s Value-Up TF, to be finalized after further discussions, will include pension and tax policies. A KOFIA Value-Up TF official said, "In the U.S., about half of the pension funds flowing through systems like 401K are invested in U.S. stocks. However, in Korea, pension funds are not flowing into the capital market, so efforts to improve this are necessary."

In fact, although Korea’s retirement pension market is growing, the proportion flowing into the stock market remains in the low teens. According to the Ministry of Employment and Labor, as of the end of 2022, the size of retirement pension reserves increased by KRW 40.3 trillion from the previous year to KRW 335.9 trillion. Of this, the principal-guaranteed type accounted for KRW 298 trillion (including standby funds), making up the majority (88.7%). The performance-based type was KRW 37.9 trillion, accounting for only 11.3%. The proportion of performance-based management also shrank from 13.6% in 2021.

An executive in the retirement pension division of a domestic securities firm said, "Since most domestic retirement pensions are principal-guaranteed products, it is difficult to achieve high overall returns." He added, "A virtuous cycle must be created where retirement pension funds flow into the stock market, contributing to market activation, which in turn leads to increased investment returns, enabling long-term growth."

Measures to reduce investors’ tax burdens are also expected to be considered. At a press briefing earlier this year, KOFIA Chairman Seo Yu-seok emphasized the need for tax incentives for long-term direct and indirect stock investments, including public stock funds, as part of efforts to resolve the Korea Discount. A KOFIA Value-Up TF official stated, "Strengthening shareholder rights protection or increasing shareholder returns alone has limitations," adding, "We will continue to make various proposals to make the Korean market more attractive."

The policies proposed by KOFIA’s Value-Up TF are expected to create synergy with the guidelines developed by the Exchange’s Value-Up Advisory Group. The advisory group, chaired by Professor Cho Myung-hyun of Korea University, is preparing coordination plans through communication with listed companies while developing a Korean-style index that will serve as the underlying asset for value-up exchange-traded funds (ETFs). The finalized guidelines are scheduled to be announced at the Exchange’s second seminar in May.

Financial authorities are also paying close attention to the association’s activities. A Financial Services Commission official said, "Since the association itself is a place where investors’ opinions gather, we expect policy recommendations and overseas cases to be presented mainly from the perspective of institutional investors." He added, "Unlike the advisory group, there may be points raised by asset management companies, and we expect the association to discover such policies."