APG Chief Managing 986 Trillion Won Says "Korean Stock Market Lacks Trust in Market, Corporates, and Regulators"

Yukyung Park, Head of APG Asset Management, Interview
"From the Perspective of Foreign Investors, the Market, Companies, and Authorities Are Hard to Trust"
Commercial Act Amendment Should Be an Opportunity to Fundamentally Improve the Market Structure

The head of emerging markets at APG Asset Management, one of the world's top 10 public pension fund managers, has pointed out that the Korean capital market is still "difficult to trust from the perspective of foreign investors." She diagnosed that there is a lack of trust in every aspect, from market structure and the corporate governance of listed companies to government policies and financial regulatory authorities.

Yukyung Park, Head of the Emerging Markets Equity Division at APG, made these remarks in a recent video interview with Asia Economy. APG is the asset management arm of the Netherlands' public pension fund, one of the largest pension funds in the world. As of the end of last year, its assets under management (AUM) stood at 616 billion euros (approximately 986 trillion won).

Before overseeing emerging market equity investments, Park was responsible for responsible investment and governance in the Asia-Pacific region. Last year, she met with Lee Jae-yong, Chairman of Samsung Electronics, to discuss ways to improve the governance structure of the Samsung Group. With the passage of the Commercial Act amendment approaching, Park was asked about the background of the so-called "Korea discount" and expectations for its resolution. She also acknowledged that the Korean capital market has been changing rapidly since the presidential election, but expressed concern that some structural distortions remain. She said, "We are at a moment where we are trying to change the core operating principles of the stock market, which have not changed for almost 70 years, and move toward true capitalism," adding, "The Commercial Act amendment is a symbolic trigger for this change, but it will not be easy."

Park identified three types of trust deficits in the Korean capital market from the perspective of foreign investors. First is the lack of trust in the market's operating principles. She explained, "The fact that the 0.5% stake held by chaebols or controlling shareholders is more powerful than the much larger stakes held by minority shareholders means that the basic principles of the capital market are not functioning properly," and added, "This is not an argument to dismantle chaebols or controlling shareholders immediately, but rather a recognition that changing the principles that have driven companies through market pressure will not be easy."

She also pointed out a lack of trust in listed companies. Park said, "There is not enough trust that management works for all shareholders and that governance bodies like boards of directors function properly to ensure listed companies fulfill their basic responsibilities," and criticized, "There is a lack of governance that serves all shareholders, and even the belief that companies operate in full compliance with laws and regulations is weak."

The last issue she identified was a lack of trust in regulatory authorities. Park said, "Regulators should act as fair referees, but governance policies change depending on the government," and explained, "Because the basic operating principles and regulations are not pursued with sincerity and consistency, overseas investors cannot shake off their doubts."

She advised that Korea should use the amendment of the Commercial Act as an opportunity to become a truly advanced capitalist country. She emphasized that the focus should not be on superficial achievements such as inclusion in the MSCI Developed Markets Index, but rather on fundamentally improving the market structure. Park said, "Obsessing over inclusion in the MSCI Developed Markets Index is like insisting on carrying a Chanel bag despite having a low income," and pointed out, "Regardless of the actual effects of inclusion, if the fundamental operating principles of the capital market are properly corrected, the market will naturally become more attractive and foreign capital will flow in."

Meanwhile, she also expressed disappointment with the domestic private equity fund market. Park criticized, "The corporate life cycle and the flow of capitalism involve entrepreneurs accepting capital from private equity funds and growing by embracing the logic and demands of capital, but in Korea, private equity funds often fail to play this role and instead fall into speculative short-termism." As a result, she explained, the distorted concept of a "management premium" has emerged in the market instead of proper value assessment, negatively impacting the entire listed market. She said, "A company's value should be assessed through a series of processes such as capital raising, growth, and mergers and acquisitions (M&A) after its founding," but expressed concern that "the involvement of management premiums is shaking the standards for value assessment and even undermining the essence of capitalism."