[Reporter’s Notebook] Why "Jigeumjobangwon" Feels Uncomfortable

The KOSPI has surpassed 4,000, continuing its record-breaking rally. Every bull market brings with it new buzzwords. In the mid-2000s, amid expectations for China’s growth, the term “Chahwajeong” (automobiles, chemicals, and oil refining) was coined. Later, terms like “BBIG” (batteries, bio, internet, and games) emerged. Recently, the spotlight has been on “Jigeumjobangwon,” a variation of the existing “Jobangwon” (shipbuilding, defense, and nuclear power), with the addition of holding companies and financial stocks. Sometimes, financial stocks, semiconductor stocks, and holding companies are grouped together with “Jobangwon” and referred to as “Geumbanji.”

These sectors have shown impressive performance this year. Many experts predict that their upward momentum will continue into next year. As the government introduces various stimulus measures to encourage capital to flow from real estate into the stock market, optimism is growing that this rally is not just a rebound but a sustained upward trend. This is fueling the sentiment that “now is the time to invest in stocks.”

Nevertheless, the term “Jigeumjobangwon” feels somewhat awkward. This is because it combines fundamentally different types of entities. Finance, shipbuilding, defense, and nuclear power are all promising industries based on tangible assets. However, holding companies are different. While there are some business holding companies, most do not generate results through production or orders. Instead, they are upper structures in corporate governance that rely on dividends from subsidiaries, certain brand usage fees, or rental income. In essence, they are a kind of paper company with no actual business operations.

The more fundamental issue is that Korean holding companies have seen their positive role as alternatives to circular shareholding weaken, and they have instead become symbols of the “Korea Discount.” Many holding companies have indiscriminately listed their subsidiaries, diluting the value of existing shareholders, and the value of subsidiaries has been double-counted, distorting the valuation of the holding companies themselves. For owners or major shareholders, holding companies have become an efficient means to control entire groups with minimal ownership stakes. There is little incentive to pursue shareholder-friendly policies. When stock prices rise, inheritance and gift tax burdens only increase. As a result, the government’s “Value Up” policy and market demands for treasury share cancellations and increased dividends clash with the interests of owners.

Despite this, the stock prices of holding companies have soared to unprecedented levels this year. Doosan, the holding company of Doosan Group, surged by about 240%, and Hanwha rose by 265%. These increases far outpace the KOSPI’s gains over the same period. Experts recommend holding companies due to expected dividend increases following amendments to the Commercial Act and improved subsidiary performance, but owners still lack strong incentives to boost share prices. On the contrary, amid regulatory changes, they may attempt to suppress share prices. For them, the astronomical inheritance and gift taxes are a real fear, but the cost of consulting to avoid these taxes is manageable.

Ultimately, to encourage voluntary shareholder returns, both “carrots” and “sticks” are needed. Without reforming inheritance tax, the “Value Up” policy alone is unlikely to change their behavior. While “Jigeumjobangwon” has become a market buzzword, the “Ji” within it still reveals the structural contradictions of the Korean stock market. Among industries driven by performance and growth, holding companies that move for control and tax savings remain out of place. That is why “Jigeumjobangwon” feels uncomfortable.