Korea developments in September

The Korean market presents a combination of attractive valuations and underlying reform catalysts. On the latter point, several important developments occurred during September:

• The second amendment to the Commercial Act came into force. This bars large listed companies from opting out of cumulative voting in their articles of incorporation, and the requirement applies from the first shareholders’ meeting held to elect directors after the effective date. It covers listed firms with assets above two trillion won, and it raises the number of audit committee members who must be elected separately to two. Despite some defensive measures from companies (e.g. staggered boards), we look forward to seeing the impact of cumulative voting in 2027 AGMs.

• The National Policy Committee proposed to amend the Capital Markets Act to force anyone who acquires 25% or more of a listed company and becomes its largest shareholder to make a tender offer to bring their stake to at least 50% plus one share. However this means an acquirer could buy 40% off-exchange and then tender for only about 10% plus one share from everyone else. We along with others want to see the bill revised to give all shareholders a proportionate chance to sell.

• The government and the ruling Democratic Party agreed to introduce a “bear hug” rule by the end of 2026, requiring acquirers to publicly disclose unsolicited takeover offers.

In addition, we look forward to the first iteration of Korea’s “name and shame” list on 2 November which will highlight listed companies trading in the lowest valuation quartile of their respective industries. While the market’s attention is currently focused elsewhere, the underlying momentum behind corporate governance reform remains strong in Korea and we expect this to feed through to market valuations in the near future.