We will end the Korea discount and open the era of Korea premium.
Summary
South Korea has come a long way in addressing the “Korea discount.” Regulatory and policy efforts continue to gain pace in 2025, aiming to enhance corporate governance standards, boost shareholder returns, and close the long-standing valuation gap of South Korean stocks relative to peers.
Within months of its formation in June 2025, the new Lee Jae-Myung-led South Korean administration has displayed a strong intent to improve corporate governance. Two rounds of amendments to the Commercial Act have been completed to expand board of directors’ fiduciary duty and make cumulative voting mandatory, among other changes. Further Commercial Act revisions and tax reforms are already in the works.
As corporates are also responding positively with shareholder-friendly policies, investor interest in South Korea has grown, driving strong gains in 2025. We believe this is just the beginning of a structural shift. The stage is set for the Korea discount to narrow further, in a trajectory that is comparable to the Japanese market since its corporate governance reform accelerated in 2023. If that potential materialises, South Korean equities may reward investors with valuation re-ratings and enhanced total returns over time, presenting unique alpha opportunities for portfolio diversification.
In this article, we will provide a brief update on some of the recent and upcoming policy changes driving corporate governance reforms in South Korea. We will also look at South Korea’s market fundamentals and how companies are responding with dividends and buybacks. In addition, we will discuss how shareholder activism is taking shape in the country, citing some of Templeton Global Investments’ (TGI) engagement experience on the ground. With that backdrop set, we will then consider South Korea’s potential for further re-ratings and shareholder return enhancement, drawing a comparison with Japan in its own corporate governance journey.
Footnotes:
- Translated from President Lee’s Facebook post, following the Korea Investment Summit at the New York Stock Exchange on 25 September 2025. Source: Maeil Business Newspaper. 25 September 2025.
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