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KKR
sees corporate reform unlocking Korea's valuation potential
By Im Eun-byel, The Korea Herald - US
investment firm KKR highlighted South Korea as one of Asia's most compelling
valuation opportunities, arguing that ongoing corporate governance reforms
could unlock significant upside, the firm said Thursday.
In its midyear 2026 outlook report,
"The Divergence Conundrum," Henry McVey, head of Global Macro &
Asset Allocation and chief investment officer of KKR Balance Sheet, described
Korea's corporate reform story as "one of the more underappreciated
opportunities in Asia," alongside Japan.
The report said Korea is following a
similar path of Japan's corporate reform, "as management teams and
policymakers increasingly recognize that the 'Korea discount' has often been
self-inflicted through weak governance, opaque structures and sub-optimal
payout policies."
KKR said the country's corporate reform
drive, combined with growing shareholder activism, has already helped propel
gains of more than 95 percent year to date in 2026.
Despite the recent rally, roughly 70
percent of Korean listed companies continue to trade below book value, compared
with about 40 percent in Japan and less than 7 percent in the US, the equity
firm noted.
Referring to Korea and Japan, KKR said
that opportunity can broaden "because the real upside is not just multiple
expansion, but a durable improvement in margins, cash conversion and the
quality of the earnings stream."
The firm said investors should look for
opportunities tied to governance reform, capital returns, carve-outs, strategic
partnerships and private capital solutions in both markets.
It added that Japan and Korea still
appear "cheap," with corporate earnings in both markets likely to
surprise on the upside in 2026 and 2027.
The opportunity in Korea could
ultimately prove larger than in Japan as reforms gain traction across the
corporate sector, KKR noted.
While Korea's reform effort is
"earlier and more difficult," it is also "potentially more
rewarding if reforms continue to advance," the report said.
