[Click eStock] Which Stocks Should Be Noticed in the Value-Up Index?

As the Korea Value-Up Index was announced, an analysis suggested that stocks with low expectations of being included in the index are likely to benefit.

Jae-woon Cho, a researcher at Daishin Securities, stated, "Since February, stock prices of companies expected to be included in the index have already reflected the anticipation of value-up, but stocks with no such expectations are now likely to see capital inflows due to this announcement." He added, "Funds may flow out from stocks that were expected to be included but were not, moving instead to unexpectedly included stocks."

By sector, financials, consumer discretionary (automobiles), and industrials (holding companies), which are representative undervalued stocks, showed a high degree of pre-reflection in stock prices. On the other hand, efforts to include various sectors in the index led to the inclusion of many stocks from sectors with low value-up expectations such as IT and healthcare. Among the 100 stocks, 24 are from IT and 12 from healthcare.

The financial sector, which had high expectations, showed results different from predictions, and stock prices are expected to be affected. Ten financial stocks were included, but highly anticipated stocks like KB Financial were not. Researcher Cho explained, "Stocks that had high value-up expectations but were not included will face increased downward pressure." He clarified, "This misunderstanding arises from the belief that the value-up index aims to include undervalued companies to increase their value. In reality, the value-up index is designed to incentivize companies with already high corporate value, and the efforts of companies trying to be included in the index help increase their corporate value." He continued, "In fact, financial stocks included such as Shinhan Financial Group, Meritz Financial Group, Woori Financial Group, Mirae Asset Securities, and Kiwoom Securities are all undervalued companies that did not meet the conditions but were specially included through value-up disclosures (company efforts). Excluding these special inclusions, only five financial stocks are included, and no banks are included."

Particularly, among the included stocks, those outside the KOSPI 200 and KOSDAQ stocks are expected to see strong capital inflows. Cho said, "Many investors predicted that the value-up index would mainly include large-cap stocks, so capital inflows into stocks outside the KOSPI 200 and KOSDAQ stocks included this time will be relatively strong." He added, "There are 44 such stocks, accounting for 44% of the total."

Attention should be paid to "empty house" stocks with low returns since the beginning of the year among those with low inclusion expectations. Cho noted, "Among sectors and stocks with low value-up expectations, it is necessary to focus on empty house stocks that have not shown significant price increases or institutional demand since February when value-up expectations began to rise." He explained, "Based on corporate demand, returns since February, KOSPI 200 inclusion, and listing market, scoring the expected benefit from value-up index inclusion showed high scores for Symtek, Nextin, Dongjin Semichem, Soulbrain, Hana Materials, JYP Ent., Golfzon, Jusung Engineering, Haesung DS, and SOOP."