"KOSPI Still Undervalued... Disclosure of Low PBR Companies Likely to Accelerate"

BCG: "KOSPI Still Undervalued Compared to Advanced Economies"

"Disclosure of Low-PBR Company List Likely to Be Accelerated"

Korea's PBR Remains at Only 1.9x, Far Below the Over 4x Levels in the US and Taiwan

Although the KOSPI has surged recently, a global consulting firm has pointed out that it remains undervalued in terms of the price-to-book ratio (PBR) compared to major advanced economies. The report suggests that the Korean government should take note of Japan's example, where various institutional measures were implemented to raise corporate value. It also argues that companies themselves must strive for change to avoid falling behind in a rapidly evolving era.

BCG: "KOSPI Still Undervalued Compared to Advanced Economies"

On June 11, Boston Consulting Group (BCG) released a report titled "From Discount to Premium: Recommendations for Enhancing the Value of Korea's Low PBR Companies," stating, "For the domestic stock market to take the next leap, companies themselves must improve total shareholder return (TSR), including by enhancing capital efficiency."

BCG noted that, despite the KOSPI more than tripling in one year, it is still undervalued compared to other countries. Based on this year’s earnings estimates, KOSPI’s PBR stands at 1.9 times, which is significantly lower than the United States (4.9 times), Taiwan (4.0 times), India (2.8 times), and even Europe (2.2 times).

Excluding the semiconductor sector, the estimated PBR for 2026 is 1.2 times; if the four major sectors (semiconductors, defense, shipbuilding, and nuclear power) are excluded, it drops to just 1.0 times. Among all KOSPI-listed companies, the number of those with a PBR below 1 is expected to decrease only slightly from 553 in 2024 to 541 by the end of 2025, meaning that 64% of all companies are still trading below their asset value.

BCG emphasized, "If the government’s institutional reforms and the improvement in earnings in key sectors such as semiconductors, shipbuilding, and defense led to the first re-rating, it is now time for the remaining companies to take concrete actions by enhancing capital efficiency and shareholder value to drive a second re-rating."

The report also stated, "Companies must actively manage TSR." This is because, with the increase in individual investors and the rise of shareholder activism, failure to properly manage TSR could turn poor stock performance into a direct threat to management control.

BCG cited Japan as a representative example of successfully managing TSR and improving the stock market’s overall health. Over the past decade, the return on equity (ROE) of Korean companies has improved by only 0.4 percentage points, from 7.3% to 7.7%. In contrast, Japan’s net profit growth rate over the same period was 4.7%, but its ROE improved by 2.1 percentage points, from 8.7% to 10.8%.

BCG analyzed, "This was the result of shifting to a structure that generates the same profit with less capital, through measures such as divesting non-core businesses, share buybacks and cancellations, and dividend increases." As a result, the Nikkei 225 index rose more than fourfold, from 15,000 at the end of 2013 to 62,000 in May 2026.

BCG further added that the government should "persistently drive reforms so that, as the Japanese government did over ten years by steadily upgrading regulations and fostering a culture where companies prioritize shareholder value, the Korean government can also move beyond reliance on sectors like semiconductors, shipbuilding, and defense, and enable all listed companies in the market to continuously improve their capital efficiency."

On the 27th of last month, before the Korean Exchange's Excellence in Corporate Value Enhancement Awards Ceremony and Seminar, Eunbo Chung, Chairman of the Korean Exchange, gave the opening remarks. Korean Exchange

The Korean Government and the National Assembly Are Also Preparing Institutional Measures to Improve the Stock Market’s Structure

In fact, the Korean government and the National Assembly are currently preparing a variety of institutional measures to improve the structure of the stock market. President Lee Jaemyung, at a press conference marking his first year in office on June 9, assessed that the domestic stock market remains "undervalued" and announced plans to introduce institutional measures to address this issue.

One notable policy is the "Stock Price Suppression Prevention Act" (an amendment to the Inheritance and Gift Tax Act). Proposed by Assemblywoman Lee Soyoung of the Democratic Party, this bill seeks to change the basis for taxing inheritance and gifts for listed companies with a PBR below 0.8, from the current market price to a valuation based on the company's actual assets and earnings power. This bill was introduced in response to repeated concerns that, under the current system, the lower a listed company's stock price, the less inheritance tax major shareholders pay, which discourages efforts to improve corporate value.

The Financial Services Commission and the Korea Exchange also plan to put pressure on listed companies whose stock prices are low compared to their corporate value by publicly releasing lists of low PBR companies. On the previous day, the Exchange announced that it would amend the KOSPI listing regulations to establish the legal grounds for selecting and announcing low PBR firms. The Exchange stated that it would classify companies ranking in the bottom 20% by sector for two consecutive half-year periods as low PBR firms and publicly disclose their names. This so-called "Naming & Shaming" policy aims to expose and embarrass companies that neglect efforts to enhance corporate value, thereby driving change.

Kim Jeongyoung, Deputy Head of the Corporate Support Division at the Exchange, emphasized, "We will strengthen tailored support to increase participation from KOSDAQ and small and medium-sized enterprises, and, by publicly announcing the low PBR company list, encourage undervalued companies to improve their corporate value."

This content was produced with the assistance of AI translation services.