Value-Up Senior Japan, Limited Capital Inflow
Distinguished as Excellent and Promising Companies in Securities Industry Value-Up
Stocks with High Upside Potential Classified as 'Promising Companies'

After the release of the Value-Up Index, an analysis suggested that even if an exchange-traded fund (ETF) tracking this index is launched, the effect on capital inflow is unlikely to be significant.

In a recent report, the Asset Management Strategy Department of Korea Investment & Securities explained, "It is expected to take about 2 to 3 months from the index release to the actual ETF establishment, and in Japan, ETF capital inflow did not appear dramatically," adding, "The net asset value (AUM) ranking of ETFs related to the Japanese Value-Up Index actually fell below the top 100."

They advised that ultimately, the focus should be on realizing the essence of Value-Up?long-term shareholder value enhancement?rather than short-term supply and demand improvements through the Value-Up program.

Previously, Japan had actively promoted the Value-Up program policy since early last year and developed the Value-Up index called 'JPX Prime 150.' Regarding this, Korea Investment & Securities analyzed, "Considering the performance of JPX Prime 150, it is difficult to say it recorded positive returns compared to the benchmark Nikkei 225," and added, "During the bullish market in the first half of this year, it actually underperformed the market, and capital inflow was not strong."

Kyungbeom Ko, a researcher at Yuanta Securities, pointed out, "Expectations for indiscriminate passive effects on the Korea Value-Up Index need to be lowered," noting, "In the past, the 2008 Green Growth Fund, 2014 Unification Active Fund, early 2018 KRX300 Index, and 2020 BBIG K-New Deal Index all had AUMs that cannot be considered high."

The government plans to disclose details about the Korea Value-Up Index in September after announcing the 'Corporate Value-Up Support Plan' in the first half of the year. ETFs tracking the Value-Up Index are expected to be launched within two months at the earliest. Currently, the Korea Exchange is reportedly preparing two Value-Up indices: the Excellent Companies Index and the Promising Companies Index. Accordingly, Hana Securities, Yuanta Securities, and LS Securities referenced the calculation method of the Tokyo Stock Exchange's 'JPX Prime 150 Index' to classify and present expected constituent stocks for the Excellent and Promising indices.

The stocks expected to be included by securities firms are mostly listed companies previously mentioned as beneficiaries of Value-Up. The firms identified major candidates for index inclusion as automobile stocks Hyundai Motor, Kia, Hyundai Mobis, and the four major financial holding companies KB Financial, Shinhan Financial Group, Woori Financial Group, and Hana Financial Group.

Among financial stocks, Samsung Life Insurance, Meritz Financial Group, Samsung Fire & Marine Insurance, and DB Insurance were selected. POSCO Holdings, Samsung C&T, Hanmi Semiconductor, SK Gas, KT&G, and HMM were also suggested as expected constituents.

In the securities industry, it was recommended to focus on Promising Companies rather than Excellent Companies, where expectations may already be reflected in stock prices. Jangkwon Ha, a researcher at LS Securities, explained, "We expect more flexible stock price increases centered on Promising Companies rather than Excellent Companies," adding, "Since specific criteria for index segmentation have not been presented, there is ample room for expectations regarding the discovery of new promising companies."

Seonghun Lee, a researcher at Kiwoom Securities, said, "From a Value-Up investment perspective, stocks with higher upside potential in the future are expected to be Promising Companies rather than Excellent Companies," pointing out, "This is because companies with potential for future corporate value enhancement are more suitable for the Value-Up purpose than companies already assigned high corporate value."