Corporate Value Up in Korea - Focus On Reducing Outstanding Shares and Comparison to M7

• In this insight, we compare the outstanding shares changes in the Korean stock market (KOSPI and KOSDAQ) relative to M7 (Magnificent 7) companies.

• In Korea, there are more companies such as Samsung C&T, KB Financial, and KT&G that are actively reducing their outstanding shares and investors are rewarding them with higher share prices.

• Top 10 companies in KOSPI that reduced their outstanding shares (from end of 2019 to 5 Sept 24) experienced average share price increase of 116% on average in this period.

Photo by Ethan Brooke on Unsplash

Comparison of KOSPI and KOSDAQ vs M7 Companies

One of the key reasons for the "Korea Discount" in the Korean stock market is the lack of aggressive efforts to reduce outstanding shares. When the number of shares increases, shareholder value is diluted, so even if the market capitalization increases, the index does not rise.

According to the Korea Exchange, the combined number of issued shares of companies in KOSPI and KOSDAQ increased by 107.2% from 57.1 billion in 2014 to 118.3 billion as of 3 September, 2024. KOSPI increased from 35.4 billion shares to 62.7 billion shares, and KOSDAQ increased from 21.7 billion shares to 55.6 billion shares.

During the same period, the market caps of KOSPI and KOSDAQ doubled from 1,366 trillion won to 2,570 trillion won. However, KOSPI and KOSDAQ have only risen by about 35% each from the end of 2014 to 3 September 2024.