Tagged as Low-PBR, but “All the Better”... 113 Stocks Jump, Though the Rally Is Brief

Share Prices of 113 of 151 Companies Rose After Low-PBR List Released
Expectations for Expanded Shareholder Returns and Value-Enhancement Efforts Already Priced In
Some Stocks Reversed Course After Brief Gains
Investors to Begin Separating Winner

When the Korea Exchange released a list of 151 listed companies that had long remained undervalued on a book-value basis, the share prices of related stocks began to move. Despite being labeled low-PBR companies, most stocks rose immediately after the announcement amid expectations of improved corporate value. Experts cautioned against short-term, theme-driven investment based solely on the “low-PBR” label, stressing the need to distinguish promising stocks from the rest based on their capacity to deliver meaningful shareholder returns.

After the Korea Exchange released a list of 151 companies with low price-to-book ratios, share prices of 113 stocks rose. Experts advised investors to assess companies’ ability to deliver meaningful shareholder returns rather than get swept up in short-term rallies. Getty Images

According to the Korea Exchange on November 5, the list announced on November 2 included a total of 151 companies: 96 listed on the KOSPI and 55 on the KOSDAQ. Under the Global Industry Classification Standard (GICS), companies that had ranked in the bottom 25% of the KOSPI or the bottom 10% of the KOSDAQ for the past six consecutive half-year periods were eligible for designation. The listed companies will appear on the Korea Investor's Network for Disclosure System (KIND) through the day before the next announcement, scheduled for May 4, 2027. They will also receive a “low-PBR” tag on Home Trading Systems (HTS) and Mobile Trading Systems (MTS). The list will be updated regularly on the first trading day of every May and November.

The market reacted immediately after the announcement. Share prices rose for 113 of the 151 companies, demonstrating strong investor interest. The gains reflected expectations that designated companies would announce proactive shareholder-return measures, such as share buybacks and cancellations or increased dividends, to shed the label. However, the initial rally did not last. Many stocks that briefly rose after the announcement gave back their gains or turned lower as investors took profits. As skepticism grew that inclusion on the list alone could not guarantee a genuine increase in corporate value or cash inflows, share-price performance began to diverge.

The securities industry expects the measure to serve as momentum for normalizing the capital market. “Because the list of low-PBR companies is updated every half-year, companies already on it will have greater incentives to improve their corporate value to get off the list, while companies not yet announced will have greater incentives to avoid being added,” said Lee Sangjun, a researcher at NH Investment & Securities. “Combined with institutional reforms pursued over the past two years, including the first through third amendments to the Commercial Act, this is expected to build momentum for normalizing South Korea’s capital market in 2027.”

After short-term share-price volatility subsides, investors are expected to focus in earnest on distinguishing companies based strictly on their “capacity for meaningful shareholder returns.” Investing solely because a company has a low PBR carries a significant risk of getting trapped in a so-called “value trap,” in which its share price fails to rebound for an extended period due to weak earnings and excessive debt. In fact, many companies on the list have seen operating profits plunge amid prolonged industry downturns, or lack the liquidity to fund share buybacks or dividend increases even if they want to pursue them. This has prompted calls to assess their earnings-generating capacity and cash flows, which underpin shareholder returns. “Share prices rose at most companies after the list was released, but not all companies can increase dividends or buy back more shares,” Lee said. “The market will take a clear-eyed approach to distinguishing companies, focusing on those with stable earnings-generating capacity and the ability to deliver meaningful shareholder returns.”

“With interest in low-PBR stocks rising amid high interest rates and volatility, specific groups of stocks have been identified, and a number of them have seen sharp short-term rallies,” said Shin Hyunyong, a researcher at Yuanta Securities. “However, of the 151 low-PBR stocks, 146 have market capitalizations of KRW 1 trillion or less, and 140 are valued at KRW 500 billion or less. Small-cap stocks therefore make up an overwhelming proportion, limiting the extent to which this group can be viewed as a defensive portfolio.” He added, “It is necessary to identify stocks that are likely to see sustained efforts to support their share prices and achieve greater price stability over the long term, driven by the ‘naming and shaming’ effect of being labeled low-PBR.” Among the 151 low-PBR stocks, Yuanta Securities identified Hyundai Steel, Hanwha Life Insurance, Lotte Shopping, DL, Korea Line Corporation, LX Holdings, BGF, Kolon Global, and Hansol Paper as companies whose earnings growth in 2026 compared with 2025 could support shareholder returns and lead to tangible efforts to support their share prices.

Among low-PBR companies, investors should pay attention to those whose return on equity (ROE) is improving. ROE indicates how much profit a company generates using its shareholders’ capital. It is generally positively correlated with PBR: companies with higher or improving ROE tend to command higher PBRs in the market. Even companies that have remained below a PBR of 1 due to low capital efficiency can see the fastest and strongest normalization of their PBR, or rerating, when they improve earnings generation through their core businesses and their ROE begins to rise. “The market tends to respond more strongly to the sustainability of earnings than to one-off profits,” said Kwon Beomseok, a researcher at Samsung Securities. “Companies with improving ROE are more likely to be the first to receive a valuation reappraisal.” Samsung Securities cited Lotte Shopping, Hanwha Life Insurance, DSR Wire, Hyundai Motor Securities, Shinsegae I&C, Kwangdong Pharmaceutical, Sindoh, and Chong Kun Dang Holdings as examples.

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