[THE VIEW] KOSPI 5000 Won't Be Achieved by Slogans Alone

Corporate Competitiveness Before Government Intervention
The Real Solution Shown by US Growth Stocks

With the launch of the new administration, the Korean stock market is showing a rare positive atmosphere. Despite external uncertainties, the stabilization of the domestic political situation is leading to a recovery in investor sentiment. There has also been a noticeable increase in foreign capital inflows, raising expectations for the stock market. In particular, the new administration's campaign pledge of ushering in the "KOSPI 5000 era" is attracting attention as a symbolic goal that goes beyond a mere number.

However, what is crucial now is how to build a "trustworthy market" behind these developments. The key is to create an environment in which investors can expect steady returns and invest with confidence for the long term in a predictable market.

Over the past 100 years, the US stock market has maintained a steady annual return of 7?8%, establishing itself as the center of the global capital market. The foundation for this was "trust." Investors believed in the growth potential of companies and committed their funds from a long-term perspective. This capital, in turn, created a virtuous cycle driving corporate innovation and growth.

The chronic "Korea discount" problem in the Korean stock market fundamentally stems from this issue as well. While the lack of transparency in corporate governance and backward shareholder return policies are often cited as causes, the more fundamental reason is the "absence of growth potential." With low expectations for future earnings, stock prices do not rise, and foreign capital inevitably turns away.

Of course, shareholder-friendly policies such as strengthening governance transparency and increasing dividends are necessary. The "Corporate Value-Up Program" promoted by the previous administration was part of this effort. However, financial measures such as share buybacks, cancellations, and increased dividends alone cannot fundamentally solve the problem. While share buybacks and increased dividends may boost stock prices in the short term, dividends paid at the expense of a company's future growth engines will ultimately undermine long-term corporate value.

A high stock price ultimately reflects "the market's expectation that future cash flows will be robust and continue to grow." The current administration has also declared its intention to create an "era in which people can earn a living through dividends," but dividends are fundamentally a distribution of cash that a company has secured to its shareholders. It is desirable to share these results only when a company has sufficient capacity left after making ample investments in growth and innovation. However, forced and excessive demands for dividends pose a high risk of dampening future investments such as research and development, new businesses, and facility expansion.

Tesla, Nvidia, and Google all gained investors' trust based on their "strong growth narratives" and "sustainable investment stories." Photo by Asia Economy DB

In this context, the recent cases of US growth stocks?Tesla, Nvidia, and Google (Alphabet)?are highly instructive. All of these companies gained investors' trust based on their "strong growth narratives" and "sustainable investment stories." Interestingly, Tesla has never paid a dividend. Nvidia and Google have also maintained dividend yields of less than 1%. Their competitiveness does not lie in complex governance structures or high-dividend policies.

Instead, they are preparing for future growth through continuous research and development, bold mergers and acquisitions, and flexible capital raising within the dynamic innovation ecosystem of Silicon Valley. These companies are exponentially increasing their corporate value in line with market expectations, delivering massive rewards to investors in the form of capital gains.

It is time for Korea to seriously consider adopting such a structure. This is not the time to settle for short-term stock price boosts by simply increasing dividends or focusing solely on share buybacks. The focus should be on enhancing the fundamental competitiveness and growth potential of companies. To this end, the government must, above all, create an environment conducive to technological innovation, revitalize the promising startup ecosystem, and establish policy foundations that encourage sound mergers and acquisitions. Corporate governance should also be improved so that management can increase corporate value from a long-term perspective.

The goal of KOSPI 5000 itself is not a bad one. But what matters most is "how" to achieve it. Sustainable growth can never be achieved by relying solely on direct government intervention or short-term stimulus measures.

The government must respect the autonomy of the market. The priority should be to build institutional and environmental foundations that allow companies to innovate and grow on their own. The KOSPI 5000 will not be achieved simply by chanting slogans. If this complacent approach continues, that number will remain forever a "dream number." Park Sungkyu Professor at Willamette University, USA