SEOUL, May 2 (Reuters) - South Korea on Thursday unveiled guidelines for companies participating in a government programme aimed at enhancing shareholder value, but some analysts warned that more incentives or penalties were needed for the reforms to have an impact.
The financial regulator's announcement is a follow-up to the "Corporate Value-up Programme" first proposed in February that is intended to help tackle the comparatively low valuations seen in the domestic stock market.
This so-called "Korea discount" refers to a tendency for local companies to have lower valuations compared with global peers due to factors such as low dividend payouts, and the dominance of opaque conglomerates known as chaebols.
The guidelines would help companies "select key indicators that are seen as important for enhancing corporate value based on the characteristics of each firm," Kim So-young, vice chairman of the Financial Services Commission, said.
These included setting mid- to long-term objectives, and devising plans for investment, shareholder return and business portfolio reorganisation, Kim said.
The benchmark KOSPI index showed little reaction, trading down 0.2% in afternoon trade, as investors found little new in the proposals.
"Investors were for the most part expecting tax benefits, which authorities had said would follow," said Huh Jae-hwan, an analyst at Eugene Investment Securities.
The guidelines provide principles and examples so companies can set their own plans to improve shareholder value and to communicate this with investors, said the announcement.
Companies are recommended to submit filings on their plans each year, but participation is voluntary.
Since the government first proposed the programme, market watchers have argued that stronger measures, such as tax cuts as incentives or penalties for companies that do not join, were needed to ensure change.
However, a landslide victory by the opposition in legislative elections last month has weakened the prospect of tax cuts, namely on inheritance and corporate income seen as benefiting the wealthy, analysts say.
"Still, the government says it will continue pursuing them and there are some areas where the opposition can agree on, like taxes on dividend income," Huh said.
Under the campaign, listed-companies face no binding policy measures so far to boost dividends.
The guidelines will be finalised by the end of the month so that companies can start submitting filings, the FSC said.
The KOSPI had initially rallied to a 22-month high on investor hopes for the scheme, but has fallen back since details started emerging in late February.
Reporting by Jihoon Lee and Youn Ah Moon Editing by Ed Davies
Source: Reuters