South Korea unveils measures aimed at boosting stock markets, tackling 'Korea discount'

South Korea's financial regulatory body unveiled measures to improve corporate governance on Monday, taking a leaf out of Japan's playbook, to boost its undervalued local markets and address the "Korea discount."

Korea's Financial Services Commission furnished details of its "Corporate Value-up Program," which aims to prioritize shareholder returns through incentives including tax benefits, and "encourage listed companies to voluntarily set up and disclose valuation enhancement plans."

The announcement by the FSC highlighted steps that Korean authorities are taking to boost valuations of stock markets in Asia's fourth-largest economy. The country's stock markets are often considered undervalued by analysts, who refer to the phenomenon as the "Korea discount."

The FSC acknowledged the similarities in its program with that of Japan's that has seen Tokyo markets hitting record highs for the first time in 34 years.

Japan's Nikkei 225 index traded comfortably above 39,000 points after hitting yet another high on Monday on the back of robust earnings and the government's push for better corporate governance reforms to boost shareholder returns.

The FSC said it will also introduce the "Korea Value-up Index" for institutional investors, including pension funds. "ETFs that track the Korea Value-up index will also be listed to facilitate retail investors' access to these companies," according to the statement.

The index is similar to Japan's JPX Prime 150 which comprises Japan's best-performing companies.

Daniel Yoo, head of global asset allocation at Yuanta Securities Korea said the general direction of the measures is being viewed as a positive, however, "it lacks the detail of how the corporations will increase dividend payout ratio,