The “Korea Discount” Gets a Value-Up Turnaround

While the year-to-date outperformance of non-US equities relative to US names may be attributable to a natural ebb and flow of markets around the long-term mean, the rebound in certain markets may also be a function of secular forces that have awakened animal spirits. One such instance is corporate governance and tax reform in Korea.

In 2024, Korea’s Financial Services Commissions introduced the Corporate Value-Up Program to combat the persistent “Korea discount” in equity valuations as a result of foreign investors’ general reluctance to invest in Korean-domiciled businesses. These reforms are focused on the expansion of fiduciary standards on corporate boards to spur changes at chaebols, the large, family-controlled conglomerates that dominate the Korean economy. While this initiative is in its early stages, we believe that it has the potential to drive a sustained interest and durable re-rating of Korean equities if it becomes a catalyst for meaningful improvements in corporate governance.

Fueled by a variety of other factors like growing investments in artificial intelligence and the recently announced trade deal between the US and Korea, the MSCI Korea Index has been a standout performer with an 84% gain in year-to-date 2025.¹ While the “Korean discount” is still below its long-term historical average, it has begun to narrow this year. We remain cognizant of risks and challenges, and, as a result, we believe that selectivity in this market is paramount. With a track record of three decades of investing in Korea, we have observed that the country’s corporate focus on innovation in high-end precision manufacturing has contributed to a high density of world-class enterprises, including high-quality global companies with strong management teams and a qualified manufacturing base.²