Korea to Publicly Identify Lowest-PBR Stocks on Trading Apps From November

Companies listed on Korea’s main stock market that rank in the bottom 25% of price-to-book ratios for three straight years, or in the bottom 10% on the Kosdaq market, will be tagged as “low PBR” on brokerage mobile trading systems starting in November.

The Financial Services Commission on July 28 unveiled detailed criteria for its low-PBR disclosure regime. At the core of the plan is a twice-yearly naming-and-shaming list of companies with persistently weak PBRs, aimed at prodding listed firms to raise corporate value.

Under the plan, companies on the KOSPI market will be classified as low-PBR firms if they rank in the bottom 25% of PBR over six half-year periods, equivalent to three years. On the Kosdaq market, the cutoff will be the bottom 10%. To account for industries such as finance, where PBR is structurally lower, authorities will divide companies into 11 sectors and calculate PBR rankings every half year. Based on a Korea Exchange simulation conducted in May, 80 to 130 KOSPI-listed companies and 40 to 90 Kosdaq-listed firms would qualify, representing about 5% to 10% of all listed companies.

In March, authorities presented as an example companies that ranked in the bottom 20% for one straight year. They later extended the period to three years and eased the threshold, citing industry boom-and-bust cycles and the time needed for performance improvements to become visible. Companies that disclose plans to enhance corporate value will be excluded from publication on the low-PBR list for one year.

Low-PBR companies will be disclosed on the exchange’s website on the first trading day of May and November each year. Brokerage mobile trading systems will also display tags identifying them as low-PBR companies. Authorities also plan to incorporate PBR into stewardship code guidelines and the substantive review process for delisting. The FSC plans to publish its first low-PBR list on Nov. 2.

Shim Woo-il, Hankyung.com reporter, goodwill@hankyung.com