In the domestic stock market, preferred shares are showing strength, surpassing common stock (the main shares). With the presidential election approaching, major candidates are announcing pledges emphasizing the expansion of dividends for listed companies, which is generating increased interest in preferred shares that have high dividend levels and have been overlooked until now.
Unlike common shares, preferred shares are also cited as having a smaller circulation, which is seen as a background for their strength. This tendency for preferred shares to show strength is captured in a market where the proportion of individual funds is high.
Experts analyze that preferred shares with a high deviation rate compared to common shares have room for further gains, but advise that when investing in preferred shares, one should accurately check the dividend levels and be cautious of price distortion phenomena.
According to the Korea Exchange on the 21st, during the past month (from April 18 to May 20), the KOSPI Preferred Stock Index, composed of 20 high-quality preferred stocks listed on the domestic securities market, rose by 8.26%. During the same period, the KOSPI index increased by 5.32%. The rise in the share price of preferred stocks exceeded the market average.
In particular, the share price increase rates of major preferred stocks significantly outpaced those of common shares. Doosan 2 Preferred B (196.56%) and Doosan Preferred (104.64%) exceeded the increase rate of their common share, Doosan (47.48%), by more than double. Hyundai Motor Preferred (7.48%), Hyundai Motor 3 Preferred B (7.47%), and Hyundai Motor 2 Preferred B (7.87%) also showed share price increase rates that surpassed those of Hyundai Motor common stock (4.29%). CJ Preferred (14.81%) and LG H&H Preferred (5.4%) also recorded higher increase rates than common shares.
The background of the strength in preferred shares lies in the active shareholder return policies of listed companies. Last year, supported by the value-up policy, many corporations expanded their dividends and initiated share buybacks, highlighting the investment appeal of preferred stocks, which are classified as high dividend stocks. The cash dividends paid by KOSPI-listed companies in December last year reached 45.5 trillion won, marking the largest ever.
Expectations regarding policies are also supporting preferred shares. Major presidential candidates have repeatedly mentioned the expansion of 'dividend payouts,' and discussions on favorable policies for preferred shares are underway, such as the introduction of a separate taxation bill for dividend income in the National Assembly.
Preferred shares do not have voting rights, unlike common shares, but their strength lies in offering higher dividends. Generally, they are traded at discounted prices due to the inability to participate in management, but recently, new types of preferred shares have emerged that grant the right to convert into common shares after a certain period, increasing their investment appeal.
In the securities industry, attention is being focused on preferred shares with significant gaps in share prices compared to common shares. By buying preferred shares with a high deviation rate at low prices, additional revenue can be expected when the price difference between them and common shares narrows in the future.
Kiwoom Securities stated, 'As we enter an early presidential election phase, if policies are pursued to attract the expansion of dividends from listed companies, preferred shares with high deviation rates compared to common stock are likely to benefit.'
Labor Gil, a researcher at Shinhan Investment Corp., noted, 'If policies such as amendments to the Commercial Act or share buyback initiatives for shareholder returns are pursued due to the early presidential election, the discount factors for preferred shares without voting rights will decrease as the rights of minority shareholders are strengthened.' He added that 'thus, flows will emerge where the deviation rate between preferred and common shares gradually narrows.' The price gap between common and preferred shares ultimately reflects the value of 'equity' (voting rights), and it is analyzed that this gap could naturally shrink due to the strengthening of minority shareholder rights.
Some observers are looking at the rapid rise in preferred shares with concern. Preferred shares can exhibit price distortion phenomena due to their low circulation, and the recent surge in preferred shares is attributed to the increased proportion of individual funds in the stock market. For example, Doosan Preferred has been analyzed to have rapidly increased in a short period due to speculation and its emergence as a theme stock in the presidential election.
A relationship from the financial investment sector pointed out, 'Preferred shares have low transaction volumes, so the prices can fluctuate sharply with trades by small investors, and there is also a risk of becoming a target for speculative forces.' According to Samsung C&T's 2024 business report, the number of circulating shares for Samsung C&T Preferred is 1.46 million, which is only 0.9% of the circulating shares of common stock.