Asia ex-Japan Equity: Letter to Investors

The so-called ‘Korea discount’, where local companies persistently trade at lower price-to-earnings multiples than their global peers, is well known. While many listed companies in South Korea can perform in line with economic cycles, which can hamper valuations, the Asia ex-Japan Equity team believe the main cause of this phenomenon is the endemic mistreatment of minority shareholders in the country.

This letter looks at the methods controlling shareholders use to augment their position at the expense of minority shareholders and outlines a review of the Asia ex-Japan team’s voting policy for South Korean directors to help address the situation. It includes a recommendation for a presumption to vote against all directors up for re-election in the majority of companies persistently trading at below book value.