Stocks Not Included in Value-Up Index
No Need to Exclude from Investment Targets
Korea Investment & Securities advised that just because a stock was not included in the 'Korea Value-Up Index' does not mean it should be completely excluded from investment consideration. On the contrary, short-term declines caused by such events can increase price merits.
In a report published on the 25th, researcher Kim Dae-jun of Korea Investment & Securities analyzed, "It appears that dividend payout ratio and return on equity (ROE) were heavily considered in the selection of the Value-Up Index components," adding, "Even if the valuation is high, if shareholder returns and profitability are good, it can be interpreted as aligning with the Value-Up direction."
He continued, "This is also a preferred criterion for individual stock investments, so liquidity inflows can be expected when the Value-Up Index is introduced and related products are launched. From a supply-demand perspective, it is expected to contribute to maintaining a stable flow of Value-Up stocks."
Regarding the Korea Value-Up Index announced by the Korea Exchange the previous day, he noted that many stocks with low valuations and less association with high dividends, such as those in IT, healthcare, and communication sectors, were included in the index. Conversely, telecommunications companies known for high dividends were not included, only Korea Electric Power Corporation KPS (Han-jeon KPS) was included in the utilities sector under industrials, and holding companies were scarcely found.
As a notable point in the composition method of this Value-Up Index, he mentioned the individual stock weight cap set at 15%, explaining, "In this case, the influence of mega-cap stocks like semiconductors on the index is weakened," and "This means the index does not show bias according to movements within the same industry."
Among financial stocks, which had the highest expectations for Value-Up, there were mixed outcomes by stock. Researcher Kim said, "Among them, it seems that whether banks are included was decided based on incentives related to Value-Up disclosures," adding, "However, there is no fundamental change. Rather, short-term declines caused by events increase price merits from an investment perspective."
Researcher Kim advised that stocks not included in the Value-Up Index should not be completely excluded from the list of interest.
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