After the KOSPI broke through the 6,000 level, volatility has widened due to Middle East geopolitical tensions, raising concerns among investors that the index could return to its past trading range. However, experts said the likelihood of a reversion to past levels is low because the market's fundamentals have improved thanks to the value-up policy to enhance the value of corporations.
Shinhan Financial Group's Shinhan Institute for Future Strategy said in its report released on the 12th, "Conditions for structural transition in Korea's stock market," that "the possibility of the KOSPI returning to its past 1,500–3,000 trading range is limited due to the value-up policy effect."
According to the report, since the implementation of the value-up program, the price-to-book ratio (PBR) of KOSPI-listed companies rose 0.55 times, from 0.85 to 1.4. Of this, the semiconductor sector contributed 0.35, and the value-up policy contributed 0.2. In particular, when converting the PBR increase attributable to the value-up policy into an index, it amounts to about 1,000 points (p).
However, the institute said the KOSPI needs a settled culture of long-term investing to keep trending upward. The institute noted, "The average holding period of domestic individual investors' portfolios is only 9 days, and they especially tend to prefer high-risk investments," adding, "The flow structure centered on short-term trading is entrenching the KOSPI's structural undervaluation."
Reducing earnings volatility and finding growth engines beyond semiconductors were also cited as tasks. Currently, about 40% of operating profit in Korea's stock market is concentrated in economically sensitive sectors such as information technology (IT) and semiconductors, meaning there is a lack of alternative growth engines to offset downturns in the cycle. The institute emphasized the need to make manufacturing more platform-based and to reorganize portfolios by shedding noncore businesses.
Proposed next-generation growth industries include energy (small modular reactors and renewable energy), batteries (all-solid-state and energy storage systems), automobiles (software-defined vehicles and Autonomous Driving), bio (AI drug development), and defense and shipbuilding. The institute said, "To foster new growth industries, a support system linked to finance is needed from the early stages."