Stop the uncertainties undermining Korea Inc.
Published: 18 Dec. 2024, 19:45
CHO WON-KYEONG
The author is a professor at UNIST and the head of the Global Industry-University Cooperation Center.
The proportion of news concerning economic policy uncertainty fluctuates in response to internal and external shocks. The Economic Policy Uncertainty (EPU) Index, which analyzes economic trends through such news data, is a critical measure in this context. This index encompasses a global measure as well as data for 24 major countries, including South Korea.
When has this index peaked in South Korea over the past decade? Key moments include Japan’s export restrictions, Donald Trump’s second term victory, Trump’s first win, the impeachment of President Park Geun-hye, the outbreak of the Russia-Ukraine war, U.S. interest rate hikes, Brexit and the restructuring of the shipbuilding industry.
As of November this year, the index stood at 277.64, significantly higher than the 1990–2014 average, second only to the peak of 303.17 recorded during Japan’s export restrictions. Globally, the index reached its highest level during the Covid-19 pandemic. Since Trump’s election victory, global economic uncertainty has risen steadily, illustrating the destabilizing effects of political turbulence.
The year 2024 has emerged as a period marked by pronounced uncertainty fueled by numerous major elections and ongoing global conflicts. In countries facing elevated uncertainty, investment risks have escalated. Yet, despite similar industrial structures to South Korea, stock markets in Japan and Taiwan remained relatively stable after Trump’s victory. So why has South Korea’s stock market suffered a unique and pronounced decline? A glance at the 10-year average price-to-book ratio (PBR) of listed companies from 2014 to 2023 tells part of the story — South Korea’s PBR stands at a modest 1.04, far behind India’s 3.32.
Could South Korea have lost the trust of foreign investors due to policies such as the total ban on short selling? The interplay of political instability and corporate neglect of shareholder value is likely to push the December index even higher. Previous administrations made efforts to address the “Korea discount” through capital market reforms, yet the need for systematic improvement and a foreigner-friendly investment climate has never been more urgent. The analogy of “signposts deep in the mountains” encapsulates the current predicament: While the government campaigns for “Buy Korea,” internal deficiencies undermine the trust needed to attract global investment. This environment demands a renewed sense of urgency to act decisively and foster change.
The author is a professor at UNIST and the head of the Global Industry-University Cooperation Center.
The proportion of news concerning economic policy uncertainty fluctuates in response to internal and external shocks. The Economic Policy Uncertainty (EPU) Index, which analyzes economic trends through such news data, is a critical measure in this context. This index encompasses a global measure as well as data for 24 major countries, including South Korea.
When has this index peaked in South Korea over the past decade? Key moments include Japan’s export restrictions, Donald Trump’s second term victory, Trump’s first win, the impeachment of President Park Geun-hye, the outbreak of the Russia-Ukraine war, U.S. interest rate hikes, Brexit and the restructuring of the shipbuilding industry.
As of November this year, the index stood at 277.64, significantly higher than the 1990–2014 average, second only to the peak of 303.17 recorded during Japan’s export restrictions. Globally, the index reached its highest level during the Covid-19 pandemic. Since Trump’s election victory, global economic uncertainty has risen steadily, illustrating the destabilizing effects of political turbulence.
The year 2024 has emerged as a period marked by pronounced uncertainty fueled by numerous major elections and ongoing global conflicts. In countries facing elevated uncertainty, investment risks have escalated. Yet, despite similar industrial structures to South Korea, stock markets in Japan and Taiwan remained relatively stable after Trump’s victory. So why has South Korea’s stock market suffered a unique and pronounced decline? A glance at the 10-year average price-to-book ratio (PBR) of listed companies from 2014 to 2023 tells part of the story — South Korea’s PBR stands at a modest 1.04, far behind India’s 3.32.
Could South Korea have lost the trust of foreign investors due to policies such as the total ban on short selling? The interplay of political instability and corporate neglect of shareholder value is likely to push the December index even higher. Previous administrations made efforts to address the “Korea discount” through capital market reforms, yet the need for systematic improvement and a foreigner-friendly investment climate has never been more urgent. The analogy of “signposts deep in the mountains” encapsulates the current predicament: While the government campaigns for “Buy Korea,” internal deficiencies undermine the trust needed to attract global investment. This environment demands a renewed sense of urgency to act decisively and foster change.
with the Korea JoongAng Daily
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