South Korea might be able to catch up with the aid of a marine services company sponsored by KKR. Asia's stocks are experiencing a surge in value due to geopolitics and the AI craze. But since the year's beginning, the KOSPI 200 has only increased by 4%, falling behind benchmark indices in Taiwan, Hong Kong, and Japan. The positive reception to HD Hyundai Marine Solution's successful launch on Wednesday, which saw a more than 40% increase in early trading, could buoy sentiment.
In spite of being the world leaders in semiconductors, automobiles, and some other industries, the $1.8 trillion stock market of South Korea is undervalued. Weak corporate supervision and strong family-controlled businesses are to blame. Inspired by Japan's aggressive drive to increase shareholder returns, which has contributed to the Nikkei 225 Index's 16% increase this year, South Korea's stock market regulator introduced its "Corporate Value-up Program" in February.
According to data from Korea Exchange, foreign investors have purchased stocks worth a net of $7 billion since then, increasing foreign ownership in the KOSPI to nearly 35% as of early April, a three-year peak. But South Korea is falling behind as the Nikkei has risen to new highs this year.
That was partially caused by itself. Financial regulators banned short sales last year. Before legislative elections, there was a large group of retail investors, and at the time, critics said the government was meddling to appease them. Though the ban is scheduled to end next month, it has likely soured sentiment, especially among institutional investors who find themselves suddenly unable to safeguard their positions.
Given this context, a lot was riding on the IPO of HD Hyundai Marine Solution, which was the biggest float in the nation in over two years. The company, which specializes in marine services like repair, reconstruction, and maintenance, appears to have a lot going for it. Profits increased by 44% to 151.1 billion won ($111 million) in the previous year as a result of the growing demand for green ships. Compared with conventional vessels, these environmentally friendly ones need more maintenance and parts.
Even better, the company has KKR, a dominant player in private equity, as a key shareholder. Institutional investors "heavily skewed" their allocations in long-only funds, bidding for 200 times the number of shares on sale, according to the IFR.
The impressive launch should, at least, hopefully encourage other potential IPO candidates like Tencent-backed video game maker Shift Up. The markets in South Korea are ready to take off.