2025-06-11-Bernstein-亚洲量化策略_是时候加倍投资韩国股票了_29页_2mb

Asia Quantitative Strategy Summary: Double-Down on Korean Equities

Core Content

This document outlines the current investment case for Korean equities, emphasizing their undervaluation, improving earnings momentum, and the potential for further shareholder return enhancements through government-led reforms. The focus is on the Corporate Value-up Program and the broader macroeconomic and market sentiment shifts that could benefit the Korean stock market.

Main Points

• Positive Outlook on Korean Equities: The authors have been bullish on Korean equities since the beginning of the year, and the sentiment has strengthened post-Liberation-day tariff reprieve. Korean equities have outperformed other Asian markets, with a YTD return of +25%, making it the best-performing market in Asia.

• Earnings Recovery Cycle: A broad-based earnings recovery cycle is expected to continue, with most sectors (except Financials and Energy) showing improving earnings momentum. The market is poised for an earnings upgrade cycle, which could further support valuation improvements.

• Foreign Investor Interest: After 9 months of outflows (-$28bn), global investors have returned to Korea, with $2.7bn of inflows since May 2025. The GEM active funds are still underweighted (-0.3% UW Korea), suggesting room for further inflows. Repatriation of funds by domestic investors could also be a catalyst.

• Valuation Advantages: Korean equities remain undervalued, with MSCI Korea at 0.93x PB and 8.5x forward PE, near 10-year lows. Despite this, the market has shown a slight re-rating in 2025, and the 'Korean discount' persists, though there are signs of improvement.

• Shareholder Returns Improvement: ROE has improved from ~6% to 9%, above the 10-year average of 8%. Dividend payout ratio has also increased from 18% to 21%, surpassing the 10-year average of 17%. However, compared to global leaders like Australia (68%) and Singapore (58%), Korea still lags.

• Corporate Value-up Program: The program, initiated in 2024, aims to enhance shareholder returns and corporate valuations. Only 153 companies (18% of KOSPI) have participated so far, and the Value-up index has outperformed the KOSPI index by 15% YTD. Disclosed companies have outperformed non-disclosing ones significantly in 2024.

• Sector Analysis: Half of the sectors in Korea are trading below book value, with Utilities, Financials, Energy, Materials, and Discretionary being the most undervalued. Healthcare is the most expensive sector on PB. Discretionary and Financials are the only sectors with ROE above the 5-year average.

• Reforms and Future Outlook: President Lee's proposed reforms, including mandatory retirement of treasury shares, enhanced director fiduciary duties, cumulative voting, and pushing Korea toward a developed market index, are seen as key drivers for future improvement. These reforms aim to address the misalignment between Chaebol interests and minority shareholders.

• Challenges: Chaebols remain a significant hurdle due to their focus on family interests and high inheritance taxes. These practices have led to a misalignment in shareholder value and have kept valuations low. The gap in treasury stock buyback and cancellation has widened, which President Lee aims to resolve.

• ETF Exposure: Investors can gain exposure to the corporate value-up theme through ETF products that track the Value-up index, which includes top companies like Samsung Electronics, SK Hynix, and KB Financials.

Key Information

• Market Performance: Korean equities have delivered the strongest YTD returns in Asia at +25%, outperforming Singapore (+18%) and other markets.

• Valuation Metrics:

  • MSCI Korea: 0.93x PB (vs. 0.98x PB at the start of the program)
  • Forward PE: 8.5x (vs. 10x in Jan 2024)
  • PB < 1: 70% of KOSPI (vs. 67% in May 2024)

• ROE and Dividend Payout:

  • ROE: 9% (up from ~6% last year, above 10-year average of 8%)
  • Dividend payout ratio: 21% (up from 18%, above 10-year average of 17%)

• Value-up Program Progress:

  • 153 companies have participated, mainly in Industrial goods (26%), Finance (18%), and Consumer discretionary (15%).
  • Disclosed companies have outperformed non-disclosing ones in 2024.
  • Companies that disclosed corporate value-up plans saw significant increases in buybacks and dividends.

• Potential Catalysts:

  • Return of foreign investor interest.
  • Repatriation of funds by domestic investors.
  • Government reforms, including mandatory retirement of treasury shares and improved corporate governance.

• ETF Exposure: Multiple ETFs have been launched to track the Value-up index, offering investors a way to participate in the theme.

Conclusion

Korean equities are currently undervalued and showing signs of a broad-based earnings recovery. The Corporate Value-up Program, combined with President Lee's reform agenda, presents a significant opportunity for valuation improvement and enhanced shareholder returns. Despite challenges posed by Chaebols, the market is positioned for a potential rebound, and the Value-up index serves as a useful tool for investors seeking exposure to the theme.