Surge to circuit breaker! South Korea's stock market leads gains in Asian markets, Samsung Electronics surges

Today, Asian markets made a big rebound! The Korean index temporarily hit the limit-up!

Let’s take a look at what happened.

On March 18, the Korea Composite Stock Price Index (KOSPI) led Asian markets higher. According to official reports, due to a 5% surge in KOSPI200 futures, a 5-minute trading halt was triggered. The Japanese stock market rose nearly 3%.

Among the heavyweight stocks, Samsung Electronics and SK Hynix rose over 7% and 8%, respectively. Despite the fact that Samsung Electronics’ union has voted to approve a strike, which has intensified disputes over bonuses and increased the risk of production disruptions at this global leading memory chip manufacturer, Samsung’s stock still increased.

Additionally, the Korean stock market received a positive signal.

Korean regulators have taken steps to restrict listed companies from separately listing some of their subsidiaries. This move aims to curb a long-standing practice criticized for diluting shareholder value.

Lee Eog-weon, Chairman of the Korea Financial Services Commission, announced this new measure at an investor conference in Seoul.

Lee Eog-weon stated, “We will establish strict standards to ensure that simultaneous listing of parent and subsidiary companies does not harm the rights of common shareholders. In principle, we will prohibit dual listings through strict review.”

The so-called “dual listing” often depresses the stock price of the controlling company and is widely considered one of the structural reasons for Korea’s long-term undervaluation (i.e., Korea discount). By banning this practice, the government hopes to improve overall market valuation and narrow the gap with global markets.

This move is also part of President Yoon Suk-yeol’s broader reform plan to modernize corporate governance and restore confidence in the capital market. Similar policies helped Korea’s stock market become one of the best performers globally last year, but since the outbreak of the Iran war, this upward momentum has weakened, and investors are seeking new catalysts.

The Korean stock market was also boosted by positive signals from Samsung Electronics’ shareholders’ meeting, with the company expressing optimistic expectations for AI demand.

Analysts said, “Chaebols have repeatedly spun off their best businesses and listed them via IPOs, which dilutes the value of the original company and hinders stock price growth.”

Many Korean chaebols have relied on IPOs of subsidiaries for financing. However, with new regulations restricting subsidiary listings, the number of high-quality businesses being split off and listed independently in the future may decrease.

For example, LG Energy Solution’s IPO in 2022 is often seen as a typical case. At that time, LG Chem spun off its rapidly growing battery business during the peak of the electric vehicle boom, and the parent company’s stock price fell about 9% within a month, entering a long-term downtrend.

Analysts said the new regulations will force companies to rethink their long-term financing strategies. Currently, investors are more focused on “valuation premiums brought by improved corporate governance” rather than the “impact of losing IPO windows in the short term.”

(Source: China Fund News)