TWSE Market Insights

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Korea's capital market has long faced the "Korea Discount" issue, caused by structural factors including corporate valuation, corporate governance, shareholder rights protection, market entry and exit mechanisms, and the accessibility of foreign investor participation. Thus, establishing a market environment that accurately reflects corporate performance in market valuations and attracts long-term domestic and foreign capital has become a critical objective of Korea's capital market reforms in recent years.

In 2024, Korea introduced the "Corporate Value-up Program," encouraging listed companies to voluntarily enhance their corporate value. Beginning in 2025, Korea further turned to IPO pricing and delisting mechanisms to improve the market’s screening function. This year (2026), the policy focus has transitioned toward “Korea Premium” based on four core principles: trust, shareholder value, innovation, and market access. The government is also actively pursuing innovation in capital market infrastructure to elevate the market's function and competitiveness.

In terms of recent stock market performance, the KOSPI index surged by 75.63% in 2025 and has more than doubled by August this year. Driven by rising stock prices, the value of Korean listed stocks held by foreign investors at the end of 2025 grew by approximately 96.9% year-on-year, with their share of total market capitalization rising from 27.0% to 30.8%. While the recent rally is largely fueled by AI, the semiconductor boom, and corporate fundamentals, making it difficult to attribute market performance solely to the recent reforms, Korea's transition from addressing the structural causes of the "Korea Discount" to comprehensive market system reforms remains a highly valuable reference.

This article outlines the main trajectory of Korea's market system reforms from 2024 to the present, exploring how its capital market shifted from resolving the "Korea Discount" to building the foundation for the "Korea Premium."

1. Promoting Voluntary Corporate Value Enhancement: Increasing Participation and Disclosure Flexibility

(1) 2024 Corporate Value-up Program: Starting from Corporate Self-Reform

In 2024, the Financial Services Commission (FSC) launched the "Corporate Value-up Program," encouraging listed companies to review indicators such as PBR, ROE, cost of capital, growth prospects, and shareholder returns. Companies are expected to analyze factors affecting their value and propose mid-to-long-term goals, execution plans, and subsequent assessments. Similar to Taiwan's approach, Korea promotes this through voluntary disclosure paired with market incentives.

(2) 2026 Adjustment to the Corporate Value-up Program Guidelines: Enhancing Disclosure Autonomy

To encourage broader participation in the Value-up Program, the Korea Exchange (KRX) amended the program's guidelines in January this year. Based on listed companies’ feedback, setting quantitative goals (such as profitability and growth rates) is challenging in practice due to changes in industry environments and future business operations. The revised guidelines allow companies to choose financial or non-financial targets based on their industry characteristics. Where specific numerical targets cannot be set, companies may instead use qualitative content, such as growth strategies or management direction, as their targets.

KRX also plans to encourage listed companies that have not yet disclosed Corporate Value-up plans to participate through tailored support, including meetings with senior executives and disclosure consultations, with particular focus on constituents of the Korea Value-up Index.

However, the "Korea Discount" stems not only from the operating efficiency of individual companies but also from structural issues like irrational IPO pricing, ineffective market exit mechanisms, and insufficient shareholder protection. Without simultaneous system improvements, resolving the market's long-term discount will remain difficult.

2. Improving Market Entry and Exit Mechanisms: Enhancing Price Formation and the Mechanisms to Delist Underperforming Companies

(1) 2025 Reform Plans for IPO and Delisting Rules

The Korean FSC further reviewed the existing IPO and delisting systems, noting that an overemphasis on initial listing price gaps could lead to deviations from fundamental values. At the same time, allowing underperforming companies to remain in the market reduces capital allocation efficiency and the overall quality of listed companies.

Therefore, in January 2025, the Korean FSC, together with the Financial Supervisory Service (FSS), KRX, and other institutions, jointly announced the Reform Plans for IPO and Delisting Rules.

A. IPO System Improvements: Enhancing Pricing Quality and Mid-to-Long-Term Capital Participation

(a) Korea introduced a prioritized allocation scheme for investors committed to holding shares. In IPO underwritings, a certain proportion of the shares for institutional investors must be selectively allocated to those making holding commitments. This proportion increases to 40% in 2026. If the 40% target is unmet, the lead underwriter must generally subscribe to a portion of the public offering and hold it for a specified period. The maximum lock-up period, which is granted bonus points, will be extended from 3 months to 6 months. Meanwhile, certain policy funds, such as the KOSDAQ Venture Fund, must commit to a lock-up period of at least 15 days to qualify for special allocations. To enforce compliance, investors who violate holding commitments, abandon subscriptions, or fail to pay will face restrictions on participating in future book building.

(b) To prevent pricing overheating caused by massive participation from small institutions, Korea raised the book-building participation thresholds for private asset management firms and investment advisory or discretionary managers. However, institutional investors who pledged a lock-up period of more than 3 months will be exempted from the strengthened requirements. Furthermore, participation via fund of funds or overseas corporations lacking substantive operations is restricted. Additionally, the bonus point mechanism for institutional investors participating on the first day of book building was adjusted to discourage the concentration of applications on day one.

(c) By specifying internal allocation standards and extending the minimum holding period for certain pre-acquired shares, Korea clarified the lead underwriters' responsibilities in pricing and allocation. Furthermore, Korea pushed forward the introduction of cornerstone investors and “test-the-waters” schemes. The former increases mid-to-long-term capital participation by locking in shareholdings for a set period, while the latter enhances the rationality of IPO pricing by gathering market feedback before finalizing the price range. Both measures were enacted into law this April and will take effect on November 13.

B. Delisting Reform Measures: Strengthening the Market’s Function of Delisting Underperforming Companies While Protecting Investors

(a) Starting in 2026, Korea has phased in higher listing maintenance standards for market capitalization and revenue.

To prevent underperforming companies from intentionally exploiting adverse audit opinions to avoid delisting or intentionally delay the delisting process, companies failing to meet audit opinion standards for two consecutive years will generally be delisted. While companies undergoing rehabilitation or workout process will be exceptionally granted an additional improvement period. Furthermore, the delisting review regime for a surviving entity in the case of relisting of a spun-off entity, currently available only in the KOSDAQ market, will be introduced to the KOSPI market as well.

(b)  To expedite the delisting process, Korea will shorten the procedures of delisting reviews and improvement periods (see the chart below). The previous practice of using "continuous reviews" as a loophole to extend improvement periods is now abolished. Furthermore, if the results of the first round of review are clear, no additional improvement period will be granted in the second round of review.

(c)  Alongside accelerating the exit of underperforming companies, Korea is introducing robust post-delisting investor protections. Previously, once a company is delisted, there is virtually no way for investors to trade the delisted stocks other than a post-delisting liquidation trading period of seven trading days. To address this issue, the Korea Financial Investment Association (KOFIA) will establish a "Delisted Company Division" on the K-OTC market, supporting trading of delisted stocks for 6 months. After that, those stocks may be transferred to the K-OTC platform to continue to be traded if KOFIA deems it appropriate. To enhance investors’ right to information, companies under a delisting review will be required to disclose main contents of their improvement plans that they submit to KRX.

(2) Second Wave of Delisting Reforms (2026): Facilitate Effective Removal of Unviable Companies

To accelerate its delisting reforms, Korea announced a second wave of measures in February this year. First, the period from February 2026 to June 2027 is designated as an "intensive delisting management period" for KOSDAQ delistings, during which the KRX will deploy a dedicated team to expedite the delisting process. Second, building upon the phased market capitalization and revenue threshold increases planned in 2025, the following stricter standards will apply to both the KOSPI and KOSDAQ markets:

A. Moving Up Implementation of Upward Adjustment of Market Cap Threshold: Starting in July 2026, market capitalization requirements for KOSPI and KOSDAQ will rise to KRW 30 billion and KRW 20 billion, respectively, with a further increase to KRW 50 billion and KRW 30 billion from January 2027.

B.  Establishing Delisting Standard for Penny Stocks: Penny stocks trading below KRW 1,000 will become subject to delisting.

C. Strengthening Requirement on Capital Impairment: A company’s total capital impairment will be assessed as a delisting condition on a semi-annual basis, instead of only at fiscal year-end.

D. Strengthening Standards Regarding Disclosure Violations: The delisting criteria for disclosure violations will be tightened, with serious and intentional violations becoming subject to immediate delisting.

Procedurally, the KOSDAQ delisting review improvement period, reduced from two years to 18 months last year, will be further shortened to one year.

By expanding exit criteria and compressing improvement periods, the second wave of reforms in 2026 enables the timely removal of financially and operationally distressed companies. This regulatory direction was subsequently integrated into the 2026 "Korea Premium" policy framework. On May 13 this year, the Korean FSC approved the KRX's listing rule amendments, and the revised standards officially took effect on July 1.

On March 18, 2026, the Korean FSC hosted a roundtable on capital market stabilization and normalization, unveiling comprehensive measures to enhance the market's fundamentals. Aligning with the national objective of driving capital market innovation to achieve a "Korea Premium," this medium-to-long-term policy framework is structured around four core pillars:

• Trust: Establishing a fair and transparent market order.
• Shareholder Value: Fostering a corporate culture that respects shareholder value.
• Innovation: Building a growth ladder for innovative companies.
• Market Access: Improving the investment environment for both domestic and foreign capital.

1. Building Market Trust: Strengthening Market Order and Screening Mechanisms

(1) Cracking Down on Unfair Trading

• • Expand the Korean FSC-FSS-KRX joint task force on stock market manipulation by boosting investigative personnel and authority.
  • Remove the cap on whistleblower rewards—allowing payouts of up to 30% of illicit gains and confiscated funds—to strongly incentivize tips from insiders and market participants.
  • Broaden the scope of investment principal confiscation in cases involving insider trading and fraudulent practices.

(2) Enhancing the Credibility of Financial Information

• • Raise the maximum administrative fines for intentional accounting fraud and impose stricter penalties for chronic violations.
  • Bar individuals responsible for severe accounting fraud from serving as executives at listed companies.
  • Expand the auditor designation system and tighten oversight of accounting firms exhibiting poor audit quality.
  • Step up inspections of market intermediaries—including credit rating agencies, accounting firms, securities research departments, and ESG rating agencies—with a focus on conflict-of-interest management and information barriers.

(3) Accelerating the Delisting of Underperforming Companies

• • Fast-track the implementation of the stricter delisting standards announced in February and expedite the processing of pending delisting cases.
  • Revitalize market-driven M&A activities to broaden restructuring options for underperforming companies. This is backed by two supporting measures: establishing disclosure guidelines for M&A proposals, and mandating that boards of directors assess the fairness of M&A pricing in the interest of all shareholders and publicly disclose their stance.

2. Strengthening Shareholder Value: Introducing Diverse Market Oversight Mechanisms

(1) Split Listing: Prohibition in Principle, Exemptions by Exception

To address the long-standing issue of parent-subsidiary split listings, the Korean FSC has established a "prohibited in principle, allowed by exception" review framework. While the KRX previously only imposed additional shareholder protection requirements on post-spin-off listings, the new regime expands this scope to include newly established or acquired subsidiaries under the parent company's substantive control, accompanied by specific review criteria.

Under the new rules, the KRX will evaluate factors such as the necessity of a standalone listing, independent financing needs, future growth potential, parent-subsidiary operational independence, shareholder communication, and protective measures. Concurrently, fulfilling its fiduciary duties, the parent company's board must assess the listing's impact on shareholders, propose protective measures, gather shareholder feedback, and formally disclose the decision following a board resolution. These rules apply equally if the subsidiary opts for an overseas listing.

The KRX's amendments to listing and disclosure rules based on this policy were approved by the Korean FSC on July 31 this year and officially took effect on August 3.

(2) Publishing the List of Companies with Low Price-to-Book Ratios (PBR)

For companies whose PBRs persistently rank at the lower end of their respective industries and that make no particular effort to improve shareholder value, Korea will introduce a “naming and shaming” policy by publishing a list of low-PBR companies. The list will be published on KRX’s KIND disclosure website, while “Low PBR” tags will also be displayed for relevant stocks on Home Trading Systems (HTS) and Mobile Trading Systems (MTS), helping investors better identify low-PBR companies and prompting boards and management to address corporate valuation issues.

On July 28 this year, the Korean FSC and KRX released detailed draft standards. Under the latest proposal, separate thresholds apply to the KOSPI and KOSDAQ markets, with PBRs calculated semiannually based on GICS industry classifications. KOSPI and KOSDAQ companies ranking in the bottom 25% and bottom 10% of their respective sectors for 3 consecutive years will be listed for publication.

Notably, this mechanism is linked with the existing Corporate Value-up Program by offering incentives for voluntary improvement. Companies that disclose corporate value enhancement plans, including plans to improve their PBRs, will be granted a one-year exemption from the low-PBR list. However, to prevent companies from using superficial disclosures to avoid market discipline, the exemption will no longer apply if a company remains in the low-PBR range for 6 consecutive years.

Based on KRX estimates using May 2026 data, roughly 120 to 220 companies could meet these criteria. Subject to finalizing rule amendments, the first list is expected to be published on November 2, 2026.

(3) Enhancing the Stewardship Role of Institutional Investors

To ensure the robust implementation of the Stewardship Code, Korea is introducing a third-party review mechanism to verify compliance among signatory institutional investors. Lists detailing which institutions have or have not fulfilled their duties will be made public.

Furthermore, regulators are exploring the expansion of institutional oversight into ESG domains, encompassing environmental and social issues. This stewardship mandate will broaden from post-investment monitoring to pre-investment target selection, seamlessly integrating stewardship into the end-to-end investment decision-making process.

The Korea Stewardship Code Development Committee finalized these revisions on July 24 this year. Following a designated preparation period for institutional investors, the revised Code will formally take effect in 2027.

3. Supporting Corporate Innovation: Building a Growth Ladder from Startups to Mature Companies

(1) Clarifying the Market Roles of KONEX and KOSDAQ

The Korean FSC has redefined the market positioning of both exchanges. KONEX will focus on its incubation function, facilitating capital market access for SMEs and startups. Meanwhile, KOSDAQ will implement market segmentation and regulatory adjustments to allow pre-profit companies with strong technological and growth potential to raise capital within a multi-layered market structure.

(2) Diversifying Exit Channels for Venture Capital

The Korean FSC noted that an overreliance on IPOs as the primary venture capital exit route often drives premature listings, which can compromise the quality of listed companies and undermine investor trust. To address this, when deploying fund-of-funds in industries requiring extended development cycles, priority will be given to funds with longer lifespans (e.g., 10 years or more). Concurrently, regulators will explore measures to incentivize financial investment firms, including brokerages, to engage in M&A and secondary markets, thereby broadening exit alternatives for venture capital.

(3) Expanding the Supply of Long-Term Risk Capital

Korea has officially launched the "National Growth Fund," committing over KRW 30 trillion for 2026. This initiative will be coupled with the risk capital supply obligations mandated for seven designated large investment banks (IBs), aiming to inject over KRW 20 trillion into innovative companies by 2028. Furthermore, to ensure effective policy execution, a public-private consultation mechanism will be established in April 2026 to conduct quarterly reviews of the risk capital deployed by these major IBs.

4. Market Access: Enhancing Participation by Domestic and Foreign Capital

(1) Expanding the Domestic Long-Term Investment Base

Korea will accelerate the rollout of long-term investment mechanisms, including public participation growth funds, Business Development Companies (BDCs), and Reinvestment Accounts (RIAs). Furthermore, starting in 2026, the performance evaluation benchmark for select pension funds will shift from a 100% KOSPI baseline to 95% KOSPI plus 5% KOSDAQ, strategically channeling more capital into the KOSDAQ market. Concurrently, financial education programs will be bolstered to widely promote long-term investment principles.

(2) Optimizing the Investment Environment for Foreign Investors

To boost foreign investor participation, Korea will advance the initiatives outlined in the January 2026 roadmap for inclusion in the MSCI Developed Markets Index. Key measures include implementing 24-hour foreign exchange trading, revitalizing omnibus stock accounts, expanding English-language disclosures, and streamlining dividend payment procedures. These actions are designed to significantly lower transaction and information costs for overseas investors, thereby catalyzing the inflow of foreign capital into Korea's markets.

Beyond reforms to market systems, Korea is also seeking innovation in its core capital market infrastructure, covering trading, settlement, and market surveillance. On June 23, 2026, the Korean FSC launched a taskforce and held a kickoff meeting on seeking innovation in the capital market infrastructure, setting out a series of measures aimed at improving securities transactions and settlement infrastructure and facilitating a seamless digital transition in the financial investment sector.

1. KRX Extends Stock Trading Hours

Korea’s push to extend stock trading hours is closely tied to the March 2025 launch of Nextrade (NXT), Korea’s first alternative trading system. NXT offers approximately 12 hours of daily trading, with its pre-market session proving particularly popular among retail investors, underscoring market demand for extended trading hours.

Against this backdrop, the KRX plans to gradually extend its own trading hours. Initially, the KRX aimed to launch both pre-market trading (7:00 a.m.–8:00 a.m.) and after-market trading (4:00 p.m.–8:00 p.m.) this year. However, taking into account the operational burdens on securities firms, such as IT system upgrades and staffing arrangements, the KRX opted for a phased rollout. The after-market is slated to open on September 14, 2026, while the pre-market is expected to be introduced potentially from the end of 2027.

This phased extension not only responds to the competition brought by NXT, but also aligns with the global trend toward longer trading hours in major markets, helping to enhance investment convenience, boost market competitiveness, and attract greater foreign participation.

2. Promoting T+1 Settlement for Stocks

Shortening the stock settlement period from the current T+2 cycle to T+1 is a core reform priority for the Korean FSC. The measure is intended to free up tied-up liquidity, mitigate settlement risks, boost market efficiency, and align Korea’s market infrastructure with global standards.

A joint working group comprising the KRX, the Korea Securities Depository (KSD), the Korea Financial Investment Association (KOFIA), and other key institutions is currently reviewing necessary supporting measures, including post-trade processing, funding and securities arrangements, and foreign investor transaction procedures. A concrete roadmap is expected to be drawn up as early as October 2026. 

In tandem, the KSD plans to establish a T+1 settlement infrastructure for OTC transactions of unlisted securities and fractional investment products by the end of 2026. This is expected to provide practical experience for settlement innovation ahead of the broader market-wide transition.

3. Transforming Market Surveillance with AI and Digital Technologies

Driven by rapid advances in AI and digital technologies, the Korean FSC is working to upgrade the market surveillance system through the adoption of AI. These tools will be used to more effectively detect and identify suspicious transactions and unfair trading activities that may be difficult to capture through traditional monitoring or manual surveillance.

At the same time, the authorities are reviewing ways to remove regulatory barriers to the use of AI in the financial investment sector, including the adoption of AI agents in personal asset management services and other areas. In doing so, they are also assessing related issues such as investment concentration, model risk, information transparency, and investor protection.

Looking across Korea's capital market reforms from 2024 to 2026, the policy trajectory eschews isolated institutional tweaks in favor of systematically addressing the structural factors weighing on market valuation. From encouraging voluntary corporate value enhancements and optimizing pricing and exit mechanisms, to cultivating a market ecosystem that accurately reflects corporate value and attracts long-term domestic and foreign capital, the reforms are comprehensive and highly integrated.

Based on the developments summarized in this article, three key observations emerge:

1. Comprehensively Overhauling Market Operations and Systematically Advancing Reforms

To unlock capital market value, Korea has conducted a holistic review of its market frameworks, supervisory regulations, and infrastructure. Beyond listed companies, the reform blueprint actively incorporates key intermediaries—such as securities firms, accounting firms, and institutional investors—assigning tailored responsibilities and measures to forge a cohesive, market-wide policy architecture.

2. Conducting Rolling Reviews of Policy Outcomes and Dynamically Adjusting Reform Pacing

Throughout the implementation phase, regulators have actively monitored progress via market feedback and roundtable discussions, dynamically fine-tuning institutional designs and the pace of execution. For instance, while the initial 2025 delisting reforms led to a notable spike in KOSDAQ delistings, the Korean FSC recognized that a deep-seated backlog of underperforming companies persisted. Consequently, the authorities decisively tightened delisting standards again in 2026 to ensure the timely and robust execution of the reforms.

3. Synergizing Targeted Policy Tools to Maximize Impact

Korea strategically deploys a diverse arsenal of policy tools—ranging from voluntary disclosures and market incentives to mandatory regulations—and deliberately links them to amplify their overall efficacy. The Corporate Value-up Program is a prime example: initially launched as a voluntary initiative, it was later coupled with the mandatory publication of low-PBR companies. By offering a temporary exemption from this low-PBR list as a reward for submitting a Value-up plan, regulators seamlessly merged voluntary corporate initiatives with market discipline, demonstrating the power of complementary policy design.

In summary, Korea's sustained momentum in capital market reform over recent years represents a structural paradigm shift. While the long-term empirical effects of these measures have yet to fully materialize, Korea’s overarching strategic approach—anchored in holistic market operations, dynamic rolling reviews, and synergistic policy linkages—provides a highly valuable reference and blueprint for charting Taiwan's future capital market reform trajectory.