Sustained governance reform is essential to restore foreign investor sentiment in South Korea's stock market, industry experts said, as overseas investors sold a net 21 trillion won ($14.5 billion) of shares on the main bourse in February alone.
"Recent commercial law revisions and value-up programs have had positive effects," Ha Jin-soo, head of JP Morgan Securities Seoul, said at a seminar marking the 70th anniversary of Korea's securities market opening, held Monday at Lotte Hotel in Seoul. "But foreign investors have many questions about how companies are implementing capital management, dividend policies, and minority shareholder protection."
Ha noted that foreign investors consider exchange rates and various tax incentives when investing, adding that "these aspects are not straightforward." He emphasized that rapid and transparent disclosure aligned with global standards, expanded English-language filings, and regular communication with policy authorities are crucial factors that could boost capital inflows into Korean equities.
Industry participants also voiced concern that external growth has outpaced internal development as the domestic capital market has more than doubled in size over the past year. "If internal growth fails to keep pace with external expansion, I worry this could become what we call a 'bubble,'" said Jung Woo-yong, policy vice chairman of the Korea Listed Companies Association.
Lee Seung-woo, head of Eugene Investment & Securities' research center, pointed out that 43% of KOSDAQ-listed companies are operating at a loss. "We need an ecosystem where underperforming companies are quickly delisted so firms with excellent technology and potential can have opportunities," he said.
Lee also highlighted a gap in investor communication practices. "The quarterly conference call rate is 95% in the United States, compared to only about 20% in Korea," he said. "These issues need to be addressed to some extent before overseas investors will view the Korean market differently."
Korea Exchange Chairman Jeong Eun-bo pledged in his opening remarks that the Korean securities market "stands at a starting point to overcome the Korea Discount of the past 70 years and advance into an era of Korea Premium." He added, "Beyond KOSPI 6,000, we must become a premium market based on trust and innovation."
The exchange is working to improve accessibility for global investors through extended trading hours aligned with global trends, shortened settlement cycles, institutional improvements for inclusion in the MSCI Developed Markets Index, and expanded English-language disclosures. It is also pursuing the establishment of a Security Token Offering trading platform to adapt to the digital transformation of capital markets.