Korea's stock market has broken through the KOSPI 9,000 level on the back of the semiconductor cycle, but analysts said the market still needs to solve the task of "stable inflows of foreign capital" to lift its strength another notch.
Taiwan, whose semiconductor-centered industrial structure and family-business-centered ownership resemble Korea's, has steadily improved corporate governance over more than 20 years and widened its valuation gap with Korea, meaning Korea's capital market reform should also proceed in a direction that boosts trust in the system rather than relying on short-term policies.
Kim Yun-jung of LS Securities said in a report on the 21st, "Since the Asian financial crisis in the 1990s, Taiwan has expanded its valuation gap with Korea through sustained efforts to revise corporate governance and has a relatively solid market underpinned by foreign equity," adding, "The evolution of Taiwan's corporate governance policies is a reference point for the direction of Korea's capital market revisions."
Both Korea and Taiwan are classified by global investors as "IT proxy" markets. In the MSCI emerging markets (EM) index, Taiwan's weight is 27.5% and Korea's is 22.6%, ranking first and second, respectively. They are also similar in having a high share of semiconductors, export-driven economic structures, and stock markets concentrated in a few large caps.
Corporate governance also shares many similarities. Korea's chaebol and Taiwan's family businesses have structures in which a small equity stake controls entire groups, and both were long criticized for lacking independent directors and board transparency.
The difference was the speed of reform that followed.
Since the late 1990s, Taiwan has steadily pushed governance improvements, capital efficiency, and dividend expansion policies, and since the 2010s has secured a structural valuation premium beyond differences in the semiconductor cycle. Korea, by contrast, is only recently seen as entering a full-fledged phase of corporate governance overhaul, including Commercial Act revisions and value-up policies.
In fact, Korea this year failed to be added to the watchlist for inclusion in the MSCI developed markets index in the market accessibility assessment. Of the 18 total assessment items, only "availability of investment instruments" improved. Five items currently have a "limited (+)" rating and five are "improvable (-)." By contrast, countries included in MSCI developed markets mostly have two or fewer items that are not rated "good (++)."
LS Securities said government capital market policies planned for the second half are aligned with these MSCI assessment criteria.
A representative example is the recently announced duplicate-listing guidelines. The Financial Services Commission and the Korea Exchange (KRX) will in principle restrict duplicate listings and, when exceptionally permitted, mandate five key duties for the parent company's board, review by an independent special committee, and consent from general shareholders under the "3% rule."
Kim said, "MSCI considers not only direct discrimination against foreigners but also controlling shareholders' infringement of minority shareholders' rights and governance distortions within the market as major factors for point deductions," adding, "Codifying board responsibility through the duplicate-listing guidelines can signal to global institutional investors that 'minority shareholder rights are equally protected in the Korean market,' directly linking to improvement in the relevant assessment item."
The government's so-called "anti-share-price-suppression law" is in the same vein. It is intended to stop the practice of controlling shareholders deliberately keeping share prices low to reduce inheritance tax burdens.
Taiwan, however, chose a different approach. Rather than taxing controlling shareholders directly for artificial share price management, it introduced a system that taxes profits retained in-house instead of being paid as dividends, encouraging voluntary dividend increases and improvements in capital efficiency. It later linked tax benefits for controlling shareholders to outcomes such as shareholder returns and return on equity (ROE), lifting the market's overall payout ratio.
Reform of the KOSDAQ market is also seen as connected to MSCI assessments.
The government is pursuing expanded tax benefits for KOSDAQ venture funds, broader eligibility for technology-special listing, and stricter delisting criteria for distressed corporations. In particular, a system to swiftly remove marginal firms with prolonged trading suspensions from the market could go beyond simple investor protection to improve market infrastructure in ways global investors consider important.
Kim said, "Marginal KOSDAQ firms are not eligible for inclusion in MSCI indexes, so the direct impact on index-tracking error is limited," but added, "If distressed firms exploit weak delisting standards to remain suspended for long periods, administrative risk grows for global custodians." Kim added, "Tighter delisting rules can reduce back-office risks in capital market infrastructure and serve as a gauge of the market's enforcement of discipline."