KOSPI Is Heading to 10,000..!!
The Core Logic Behind KOSPI Reaching 10,000 Points: The Impact of the 'Third Commercial Act Amendment'
The KOSPI made history by breaking through 5,000 points for the first time ever. Market experts analyze that reaching 10,000 points is not just a slogan but has come within sight due to structural changes. The key driver is the ‘Third Commercial Act Amendment.’
- Mandatory cancellation of treasury shares (automatic increase in EPS/BPS): The core of the third amendment is to require companies to cancel the treasury shares they hold within 1 year (existing holdings after a grace period). This forcibly reduces the number of shares circulating in the market, producing the effect of a structural surge in earnings per share (EPS) and book value per share (BPS) even if the company does not earn more money.
- Blocking management control defense tools (ban on 'white knights'): Once treasury shares, which have been abused as a tool for major shareholders to defend management control (such as disposal to third parties), disappear, companies must legitimately win shareholders' support by boosting their share prices. This brings fundamental transparency to corporate governance and becomes the trigger that permanently resolves the 'Korea discount.'
- Qualitative change in supply and demand: On expectations of treasury share cancellations, passive money such as 'shareholder return ETFs' is pouring in, and this is leading not to a one-off boost but to a long-term improvement in supply and demand.
Key Beneficiaries of the Third Commercial Act Amendment (Treasury Share Cancellation)
'Holding companies with high treasury share ratios, whose per-share value is expected to rise sharply upon cancellation, have emerged as market leaders.
Hanwha: Called the 'textbook' case of the third Commercial Act amendment, it was the first to draw a market response with its plan to cancel all of its treasury shares along with a restructuring of its businesses.
SK: Along with group-level rebalancing, it holds a high treasury share ratio (about 25%), making it the large holding company with the most pronounced BPS improvement if mandatory cancellation is introduced.
Lotte Corporation: With a high treasury share ratio approaching about 30%, the most dramatic valuation re-rating is expected if the bill passes.
LS: With the treasury share cancellation issue added on top of the power infrastructure boom, it is enjoying the dual benefit of 'earnings' and 'value-up.'
Doosan: Overcoming the noise of its governance restructuring, it is showing resilient share price movement on strengthened shareholder return policies and expectations of treasury share cancellation.
'Hidden Treasury Share Rich'
In addition to the large holding companies, we have also summarized 5 mid-sized/financial holding companies whose treasury share ratios are overwhelmingly high, or whose PBR is low, so that they cannot avoid a 'forced value-up' once the law takes effect.
Bookook Securities: Its treasury share ratio reaches the 40% range, among the highest of all listed companies. It is considered a 'hidden pearl' whose share price could be explosively re-rated as the number of circulating shares plunges upon mandatory cancellation.
Shinyoung Securities: Like Bookook Securities, it has a very high proportion of treasury shares and is classified as a traditional value stock, making it a direct beneficiary of the Commercial Act amendment.
HDC: It holds a large amount of treasury shares generated in the process of converting to a holding company, and with its low PBR (undervaluation), mandatory cancellation will be a powerful catalyst for its share price.
Kolon: Among major holding companies, its asset value relative to market capitalization is excellent, and if the ways of using treasury shares are blocked, there will be no alternative other than shareholder returns through cancellation, so it is expected to benefit.
Harim Holdings: Its valuation, which was suppressed while it grew in size through moves such as the acquisition of Pan Ocean, is likely to be spotlighted again in connection with the treasury share issue.
Small and Mid Caps Worth Knowing
KISCO Holdings (Steel/Holding Company)
Investment point: A representative 'treasury share rich' company with a very high treasury share ratio. Despite holding abundant cash assets, it has been undervalued for being stingy with dividends and the like, but it is the top candidate for a sharp improvement in shareholder return ratio once forced cancellation takes effect.
SNT Holdings (Auto Parts/Holding Company)
Investment point: A company whose treasury share ratio has steadily remained at 20-30%. Despite stable earnings, it has been neglected, but upon mandatory cancellation, the number of circulating shares will shrink sharply, making it likely to join the ranks of low-float stocks.
Fursys (Furniture)
Investment point: A solid company that operates virtually debt-free, with a high treasury share ratio. With not many shares in circulation, if treasury shares are also cancelled, its share price is expected to be highly elastic.
Ilshin Spinning (Textiles/Apparel)
Investment point: Its market capitalization is remarkably low compared with its enormous real estate asset value, including the issue of selling its Yeouido headquarters. It is a stock that will come under strong pressure to cancel treasury shares to bring its per-share value in line with its asset value.
KPX Holdings (Chemicals/Holding Company)
Investment point: A holding company with high-quality chemical affiliates, it has a high reserve ratio and a large proportion of treasury shares. It has been neglected due to low trading volume, but the treasury share cancellation issue offers a chance to catch two birds with one stone: securing liquidity and enhancing value.
Daehan Synthetic Fiber (Petrochemicals)
Investment point: An affiliate of Taekwang Group, it is an extremely undervalued stock with a PBR of around 0.2-0.3x. Its share price is excessively low compared with its assets and treasury shares, so if institutional compulsion is imposed, it is one of the stocks with the greatest upside potential.
Asia Paper (Paper)
Investment point: Along with a strong corrugated board market, it has recently been active in shareholder returns. Mandatory treasury share cancellation will give wings to the company's shareholder-friendly policies and accelerate its valuation re-rating.
CS Holdings (Building Materials/Holding Company)
Investment point: A small holding company with subsidiaries such as Chosun Welding. Its small market capitalization makes it easily accessible to individual investors, and when the treasury share issue comes to the fore, its light size may lead to high share price volatility.
Chokwang Paint (Chemicals)
Investment point: Classified as a traditional value stock, it is undervalued relative to its asset value. Once defending management control with treasury shares becomes impossible, it will have to boost its share price with only the value of its core business and its assets, so a re-rating is urgent.
E1 (LPG Distribution)
Investment point: An LS Group affiliate, it has stable cash-generating ability. In connection with a possible governance restructuring, if the ways of using treasury shares are blocked, it is highly likely to change course toward enhancing shareholder value through cancellation.
The Semiconductor Supercycle and an Earnings Explosion
The biggest reason JPMorgan sharply raised its KOSPI target (7,500 in a bull case) is the 'memory semiconductor supercycle.'
"An earnings-driven market, not a bubble": This rally is not a bubble in which only the multiple (PER) rises, but an 'earnings-based re-rating' phase in which the profits companies earn (EPS) are increasing.
Overwhelming profit growth: Memory spot prices are currently well above contract prices. JPMorgan forecast that Samsung Electronics' and SK hynix's earnings per share (EPS) this year will exceed market estimates by more than 40%, and that profit growth of more than 20% will continue.
Index-lifting effect: The earnings explosion of the two semiconductor heavyweights, which account for about 53% of the MSCI Korea Index, translates directly into a level-up of the KOSPI.
‘Forced Cancellation of Treasury Shares’
Apart from improving earnings, a powerful legal mechanism has been put in place to resolve the chronic ailment of the Korean stock market: 'undervaluation (the Korea discount).'
Mandatory cancellation of treasury shares: The core of the third Commercial Act amendment is to force companies to cancel the treasury shares they hold. When shares are burned, the company's value stays the same but the number of shares falls, so per-share value (EPS, BPS) rises mathematically and automatically.
Governance transparency: Once treasury shares, which have been abused as a tool for major shareholders to defend management control, disappear, companies must legitimately win shareholders' support by boosting their share prices. This is the change foreign investors have been waiting for most.
Structural Growth Sectors and Supply and Demand
In addition to semiconductors, industries enjoying a boom thanks to surging global demand are supporting the KOSPI.
3 structural growth industries:
Defense: Strong exports amid persistent geopolitical risk.
Shipbuilding: The first supercycle in 10 years, rising ship prices and demand for replacement with eco-friendly vessels.
Power infrastructure: Shortage of power equipment due to the expansion of AI data centers, and a transformer boom.
The 'empty house' effect in supply and demand: The index has risen, but full-scale deployment of funds by foreign investors and institutions is still at an early stage, and individual investors' money also has plenty of room to return from the U.S. to Korea. In other words, there is an abundance of sidelined money waiting to buy stocks.