Value-up Guideline Announcement Imminent: 3 Reasons Why Low-PBR Financial Stocks are Surging

As the detailed announcement of the government's 'Corporate Value-up Program' guidelines approaches, strong buying pressure from foreign and institutional investors is concentrating on major low-PBR (Price-to-Book Ratio) financial stocks such as banks, insurance, and securities in the domestic stock market. The strong expectation that this policy, aimed at resolving the chronic 'Korea Discount', will lead to aggressive shareholder returns by financial holding companies is driving the market.

Background of Value-up Guidelines and Financial Stock Surge

Recently, the financial sector has been showing strong performance, significantly outperforming the KOSPI average growth rate. The biggest driving force is undoubtedly the detailed guidelines of the value-up policy. Financial authorities plan to encourage listed companies with low PBRs to voluntarily establish and disclose corporate value enhancement plans, providing various tax incentives to outstanding companies.

In particular, with strong incentives anticipated, such as separate taxation on dividend income and corporate tax credits for the cancellation of treasury shares, the dominant analysis is that financial stocks, which have the most abundant dividend capacity, will be the primary beneficiaries. Based on this, institutional investors are rapidly increasing their allocation to financial stocks.

Core Beneficiaries of the Value-up Policy: Why Financial Stocks?

The reasons why financial stocks are considered the leading stocks of the value-up theme are as follows:

• Historically Undervalued: Despite consistently achieving record-breaking earnings, major domestic financial holding companies are representative low-PBR stocks, lingering at PBR levels of 0.3 to 0.5 times.
• Proactive Shareholder Returns: In line with the value-up guidelines, major banks and financial holding companies are already competitively announcing market-friendly policies, such as share buybacks, cancellations, and expanded quarterly dividends.
• Stable Cash Generation: Even amid expectations of interest rate cuts, they possess strong fundamentals backed by stable interest income to support the implementation of value-up disclosures.

Frequently Asked Questions (FAQ)

Q. When will the Value-up program guidelines be implemented?

The government and the Korea Exchange plan to officially start accepting voluntary disclosures from companies in the second half of the year after finalizing the guidelines. Notably, the launch of related ETFs is scheduled for the third quarter, which is expected to further improve supply and demand dynamics.

Q. Financial stocks have already risen a lot, is it safe to invest now?

While there may be some adjustments due to fatigue from the short-term surge, the securities industry recognizes this as a mid-to-long-term paradigm shift towards resolving the Korea Discount. As it is accompanied by improvements in earnings and dividend payout ratios rather than being a one-off theme, many evaluate that a mid-to-long-term investment perspective remains valid.