South Korea Can Go Only So Far Copying Japan’s Market Reforms
Returns might improve, but the power of chaebols—including Samsung and Hyundai—will limit gains
3 min
South Korea is taking a page from Japan to boost its stock market. There are certainly some low-hanging fruits to pick, but the country’s large family-controlled corporate empires, known as chaebols, could be an obstacle to more meaningful structural change.
The country’s stock exchange is set to unveil a stock index that will take into account factors such as profitability and shareholder returns. That is modeled after a similar move taken in 2014 by Japan, which uses its new index to essentially name and shame companies that failed to make the grade.
The new index is just a part of Korea’s “corporate value-up” program announced in February, aiming to boost the valuations of its market with shareholder-friendly policies. The government also proposed making changes to the tax code to encourage companies to pay more dividends. More broadly, South Korea hopes to copy the success of Japan’s drive to improve corporate governance and returns to investors.
Buybacks and dividends in Japan have risen, and shareholders have grown more vocal. Companies also are unloading their nonstrategic shareholdings in other companies, slimming down their balance sheets.
As a result, Japan has been one of the best-performing markets in the world in recent years. The Topix index hit a record high in July, nearly 35 years after its famous bubble burst.
On the other hand, South Korea’s stock market has long suffered from a so-called Korea discount , as it trades more cheaply than other emerging markets. Its main benchmark, Kospi Composite index, has been valued at an average 12 times forward earnings in the past decade, compared with around 15 times for Japan’s Topix and Taiwan’s Taiex each.
Japan’s index has gained 40% since the end of 2022, while Taiwan’s has surged 57%. Korea’s, by contrast, has gone up only 16% over the same period.
Similar to their counterparts in Japan, Korean companies haven’t historically been willing to return much capital to shareholders. The dividend yield on the Kospi is below 2%, which is lower than many markets. Buybacks are paltry and, more important, many Korean companies don’t cancel the shares they have bought back, instead keeping them as treasury shares, using that as a tool for major shareholders to keep control of the company.
On that front, there seems to be some progress. Treasury share cancellation, excluding Samsung Electronics , so far this year has already more than doubled the full-year level of 2023, according to Goldman Sachs . New regulations restricting how companies can use their treasury shares is probably one reason. Financial companies, in particular, have been eager to buy back and cancel their shares.
The elephant in the room, however, is the power of chaebols, which dominate Korea’s economy and stock market. Companies in the Samsung group, for example, make up more than 20% of the Kospi index. Besides the electronics brand, this includes companies in areas as disparate as financial services and shipbuilding. The interests of the families who control these vast corporate empires don’t usually align with those of the minority shareholders.
Instead, they have long used convoluted corporate structures, including extensive cross-shareholdings, to maintain their grip on the conglomerates. Given the chaebols’ strong economic and political influence in the country, they won’t be so easily pressured as Japanese companies have been to unwind these arrangements.
High inheritance taxes are another reason the families might not necessarily want high share prices for their companies. The government has proposed reducing the tax, but it might not be enough.
Korea’ stock market, which houses some of the world’s best-known brands, including Samsung and Hyundai Motor , has long been a laggard. The government’s new push might yield some successes, but its biggest companies could remain the toughest nuts to crack.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
A record-breaking $11 million sale at The Centennial Collection has set a new benchmark for luxury apartment living in Bondi Junction.
As interest rates, inflation and market sentiment fluctuate, investors are being urged to focus on data, not panic.
The Federal Budget may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.
3 min
For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.
The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:
Is the way we hold our wealth still fit for purpose?
In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.
The backdown is welcome. But it also highlights something much bigger.
This Budget has accelerated a conversation that many Australian families have been postponing for years.
The conversation is not really about tax. It is about wealth stewardship.
For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.
We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.
Their children are now adults. They may own multiple properties.
They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.
The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.
The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.
Importantly, trusts themselves are not the issue.
Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.
And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.
The real issue is complacency.
Too often, families create structures and assume the job is done. It isn’t.
Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.
We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.
Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.
At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.
How do you help your children enter the property market without exposing family wealth to relationship breakdowns?
How do you structure wealth so that it remains a source of opportunity rather than future conflict?
These are the questions families should be asking now.
The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.
But the lesson remains: the wealth landscape is changing.
Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.
The families who will be best placed for the future are not necessarily those with the greatest wealth.
They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.
Ultimately, preserving wealth is not about avoiding change.
It is about preparing for it.
Because the greatest risk is not change itself.
It is losing the ability to respond to it.
Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer
From elevated skincare to handcrafted home pieces, this year’s most thoughtful gifts go beyond the expected.
Warmer minimalism, tactile materials and wellness focused layouts are redefining luxury interiors as homeowners design for comfort, connection and lasting appeal.
