🚨 Stock Market Stimulus: Korea Discount Solutions and Capital Market Growth Policies

Today Korean Social News | 2025.07.14

📌 Stock Market Stimulus Expected to Solve Korea Discount, Policy Consistency is Key

💬 Bookook Securities CEO Park Hyun-chul said that the Lee Jae-myung government's stock market stimulus policies will play a key role in improving the domestic stock market structure, restoring investor confidence, and reducing the Korea Discount (undervaluation of Korean stocks). He said that detailed policies like commercial law reforms, dividend income separate taxation, unfair trading response teams, and corporate value-up programs must be implemented systematically and consistently to expect long-term upward trends. Meanwhile, Bookook Securities is seeking new growth drivers by strengthening bond expertise, discovering small and medium enterprises, and preparing for STO business.

Summary

• Stock market stimulus is a comprehensive policy by the government to boost stock market activity and restore investor confidence.
• The goal is to solve the Korea Discount so that Korean companies are properly valued.
• Policy consistency and continuous implementation are evaluated as key success factors.

1️⃣ Definition

Stock market stimulus means comprehensive policy packages that the government pushes to boost stock market activity and restore investor confidence. Simply put, it means all government efforts to make the stock market more active and create an environment where investors can invest with confidence.

The goal is not just to raise stock prices, but to improve market structure and create a healthy capital market where company values are properly evaluated.

💡 Why is it important?

• It solves the 'Korea Discount' where Korean companies are undervalued overseas.
• It restores confidence of individual and institutional investors to boost investment activity.
• It helps companies raise funds smoothly, contributing to economic growth.
• It creates a fair and transparent market environment to protect investors.

2️⃣ Main Policies and Content of Stock Market Stimulus

📕 Key Policy Components

• Dividend income separate taxation is the most notable policy. Main contents are as follows:

  • Currently, dividend income is combined with comprehensive income and taxed at up to 45%.
  • Through separate taxation, the tax burden is reduced by fixing it at a certain rate (e.g., 15-20%).
  • Tax burden for high dividend recipients is greatly reduced, making dividend stock investment more attractive.
  • Companies also have incentives to increase dividends, promoting shareholder-friendly management.

• Corporate governance improvement through commercial law reform is being pushed. Main reform directions are as follows:

  • Introduction of multiple voting rights stocks solves both founder management protection and investment attraction.
  • Electronic voting activation makes it convenient for small shareholders to exercise voting rights.
  • Board independence strengthening and expanded outside director roles increase transparency.
  • Strengthening shareholder protection mechanisms builds investor confidence.

📕 Market Soundness Enhancement Plans

• Market fairness is strengthened with the launch of unfair trading response teams. Main activities are as follows:

  • Real-time monitoring of unfair trading activities like market manipulation and insider trading.
  • Introduction of abnormal trading detection systems using AI and big data.
  • Strengthening penalties for violations to increase deterrent effects against illegal activities.
  • Building rapid response systems to protect investors.

• Corporate value-up programs support company value improvement. Main contents are as follows:

  • Encouraging companies to voluntarily establish value improvement plans.
  • Presenting specific measures like ESG management, governance improvement, and dividend expansion.
  • Providing tax benefits or financial support for excellent companies.
  • Ensuring transparency through regular evaluation and disclosure.

Major Challenges and Concerns of Stock Market Stimulus

1. Tax Revenue Decrease: Concerns about government tax revenue decrease and fiscal soundness due to dividend income separate taxation
2. Wealth Concentration: Possibility of income inequality worsening due to policies favoring high dividend recipients
3. Market Distortion: Concerns that artificial stimulus measures could distort market mechanisms
4. Policy Sustainability: Uncertainty about maintaining policy consistency when governments change
5. Effectiveness Verification: Short-term effects may exist but long-term structural improvement effects are unclear

3️⃣ Korea Discount and Solutions

✅ Causes and Current Status of Korea Discount

• Korea Discount stems from various structural factors. Main causes are as follows:

  • Opacity in large company governance and lack of small shareholder rights protection are problems.
  • Low dividend yields and insufficient shareholder return policies reduce investment attractiveness.
  • There are concerns about geopolitical risks (North Korea issues) and economic growth rate slowdown.
  • Lack of long-term investment culture among domestic institutional investors and lack of foreign investor confidence continue.

• The current undervaluation level of Korean stocks is serious. Main indicators are as follows:

  • Korea's KOSPI PER (price-earnings ratio) is 30-40% lower than major countries.
  • Dividend yield is around 2%, similar to the US (1.5%) and Japan (2.3%), but undervalued compared to growth potential.
  • Foreign investors' proportion in Korean stocks continues to decrease.
  • Even the same companies often receive higher valuations when listed overseas.

✅ Solutions and Expected Effects

• Government policies and corporate efforts are needed simultaneously. Main solutions are as follows:

  • Strengthening shareholder return policies through dividend expansion and share buybacks should be prioritized.
  • Transparency and sustainability must be improved through governance improvement and ESG management expansion.
  • Activation of stewardship codes by pension funds and domestic institutional investors is needed.
  • Strengthening IR (investor relations) activities and expanding English disclosures to attract foreign investors is important.

• Long-term effects can be expected through gradual improvement. Expected effects are as follows:

  • Interest and investment in dividend stocks will greatly increase due to dividend income separate taxation.
  • Fundamentals will improve through companies' voluntary value improvement efforts.
  • Foreign investors' interest and investment proportion in the Korean market will recover.
  • Overall valuation increases will strengthen the capital market's funding function.

4️⃣ Related Terms

🔎 Korea Discount

• Korea Discount refers to Korean companies being undervalued overseas.
• Korea Discount means Korean companies' stock prices are valued lower compared to overseas companies of the same level. Simply put, Korean companies with the same capabilities trade cheaper in stock markets than foreign companies.
• Main causes of Korea Discount include: First, opacity in corporate governance and lack of small shareholder rights protection. Second, low dividend yields and lack of shareholder-friendly policies. Third, concerns about geopolitical risks (North Korea issues, China dependency, etc.). Fourth, domestic-focused economic structure and growth rate slowdown concerns.
• Solving Korea Discount is a very important task for Korean economy and capital market development. This requires corporate transparency improvement, shareholder return policy strengthening, governance improvement, and appropriate government policy support together.

🔎 Dividend Income Separate Taxation

• Dividend income separate taxation is a system that applies separate fixed tax rates to dividend income.
• Dividend income separate taxation means calculating taxes by applying separate fixed tax rates to dividend money received from stock investments, rather than combining with other income. Currently, dividend income is combined with earned income to impose comprehensive income tax.
• Problems with the current system include that high-income earners have excessively high tax burdens as dividend income falls into the 45% maximum tax bracket. This leads to avoiding investment in companies that pay high dividends, and companies also prefer internal reserves over dividends.
• Expected effects of introducing separate taxation include reduced tax burden on dividends making dividend stock investment more attractive, and companies having incentives to increase dividends leading to shareholder-friendly management expansion. Long-term investment culture will also take root and contribute to stock market activation.

🔎 Corporate Value-up Program

• Corporate value-up program is a comprehensive support system for improving corporate value.
• Corporate value-up program means a comprehensive system where the government supports companies to voluntarily establish and implement plans to increase corporate value. The goal is to achieve both stock price increases and investor confidence recovery by improving fundamental corporate value.
• Main program contents include: First, having companies establish 3-5 year value improvement plans. Second, presenting specific implementation measures like ESG management, governance improvement, dividend policy improvement, and business restructuring. Third, providing incentives like tax benefits, financial support, and deregulation for companies achieving goals.
• The advantage of corporate value-up programs is encouraging voluntary corporate participation rather than government unilateral regulation. Also, by focusing on long-term corporate competitiveness strengthening rather than short-term stock price boosting, it can establish sustainable growth foundations.

5️⃣ Frequently Asked Questions (FAQ)

Q: How do stock market stimulus measures help ordinary individual investors?

A: Stock market stimulus measures help individual investors in several ways. First, dividend income separate taxation increases after-tax returns on dividend stock investments. Currently, high-income earners pay up to 45% tax on dividend income, but with separate taxation, this will drop to 15-20%. Second, eliminating unfair trading means individual investors suffer less damage from information asymmetry. Reduced market manipulation and insider trading create fairer investment environments. Third, corporate value-up efforts increase overall corporate value, expecting long-term stock price increases. Fourth, commercial law reforms strengthen small shareholder rights, making voting easier and increasing management participation opportunities. However, not all policies show immediate effects, so long-term investment perspectives are important.

Q: What conditions are needed for stock market stimulus measures to succeed?

A: Several conditions must be met together for stock market stimulus success. First, policy consistency and sustainability are most important. Policy directions must be maintained even when governments change for investor confidence. Second, voluntary corporate participation and efforts are essential. Government policies alone have limits, and companies must actually improve governance and increase shareholder returns. Third, market infrastructure and system advancement must support this. Disclosure systems, monitoring systems, and investor protection mechanisms must develop to international standards. Fourth, restoring foreign investor confidence is important. Managing geopolitical risks and operating markets according to global standards are needed. Fifth, establishing long-term investment culture must come first. Investment culture emphasizing corporate fundamentals rather than short-term profit seeking must spread for policy effects to continue.