[KOSPI Level-Up]③-1 "Strong Value-Up Commitment Needed Like Japan... Clear Incentives and Penalties Essential"

"Japan's Strong Resolve Is the Key to Value-Up Success"
Lim Sungyun: "The Next Korean Administration Must Present Clear Sticks and Carrots"

"Japan demonstrated a very strong commitment to scaling up its stock market value. It is important for the next Korean government to keep the issue of scaling up at the forefront and pursue it vigorously throughout its term."

Lim Sungyun, Partner and Co-CEO of Dalton Investments Korea, who has overseen Asian investments at the global asset management firm for over 10 years, stated that the upcoming government, which will be inaugurated in June, must introduce "clearer sticks and carrots" to boost the value of the Korean stock market.

In a recent interview with Asia Economy, Lim positively evaluated the major presidential candidates' pledges to support the Korean stock market, such as "KOSPI 5000" and "breaking out of the box market," but emphasized that these should not remain as populist promises aimed at winning votes. He pointed out, "The biggest factor behind the Korea discount is related to scaling up. From a shareholder's perspective, there is a lack of trust that companies prioritize shareholder value. Shareholder returns and dividends are all connected to this." Lim argued that to shed the chronic label of the Korea discount, urgent improvements are needed in corporate governance and strengthening shareholder returns.

He gave a positive assessment of the capital market advancement and scaling up program (corporate value enhancement plan) promoted by the Yoon Suk-yeol administration, saying, "It was a major change and raised an important issue." However, he expressed regret, noting, "As the process unfolded, there was a lack of clear sticks and carrots, which led to a gradual loss of momentum and a perceived weakening of the government's will."

Lim stressed, "The next government must be even more determined and forceful in pushing for scaling up, and the approach must be consistent." He cited Japan, which served as a role model for Korea's scaling up program, as a case of continuous and consistent reform. Dalton Investments, where Lim works, managed global assets totaling 4.5 billion dollars (about 6 trillion won) as of the end of last year and has maintained a dedicated research team in Tokyo since 2000, investing in the Japanese market for over 20 years.

As an expert in Asian market investment, Lim highlighted Japan's "strong determination" as the key lesson for Korea from its successful scaling up case. He explained, "Japan appointed market-savvy experts to key positions and allowed them to work there for extended periods. The push for reform grew stronger throughout the process."

By ensuring that financial experts with extensive field experience and reform-minded professional bureaucrats, rather than political appointees, led the relevant policies, Japan created an environment where these individuals could drive consistent reforms over the long term. In addition, the financial authorities' continuous commitment helped prevent the initiative from fizzling out, which was another factor in Japan's successful scaling up.

Lim also cited the example of Japanese financial authorities previously warning that companies with a price-to-book ratio (PBR) below 1 for an extended period would be delisted. He added, "In reality, delisting did not occur and it ended as a warning, but the determination was that strong."

Lim further expressed concerns about the structural growth challenges facing the Korean economy due to low birth rates and an aging population, as well as the lack of entrepreneurial spirit. He noted, "Japan experienced similar phenomena, which is why Korea must also increase the efficiency of capital utilization, just as Japan did." He emphasized, "There is a lot of dormant capital in Korean corporate activities. If capital is moved to prioritize shareholder value, other activities will also be adjusted accordingly." He added, "There is ongoing discussion in the market about the need for tax incentives to promote long-term investment and separate taxation of dividend income to address supply-demand issues. The direction should be to discourage excessive focus on short-term investment."