Financial markets were volatile on Thursday 8th

China's deflation for 4 consecutive months... The possibility of stimulating the economy grows

Financial markets were volatile on Thursday (8th, local time), affected by a variety of factors. Investors focused on analyzing corporate reports and bidding on U.S. government bonds, noting subtle fluctuations in the market.

Market Trends: U.S. stock futures and Europe's Stoxx600 indexes were lower and unchanged, respectively. Markets ignored concerns about commercial real estate and technology stocks pushed the S&P 500 index to new highs with endless attention from investors.

Policy Trends: The U.S. Treasury Department has successfully led the sale of three- and 10-year Treasuries, but analysts say Thursday's long-term government bond sales could be a difficult test. The Fed has issued a warning that a rate cut would not be possible until June.

Earnings Season: Solider-than-expected corporate profits are driving the stock market. Stronger-than-expected earnings and cost-cutting efforts led Walt Disney Co DIS to jump about 8% before the opening bell, while chipmaker Arm Holdings Inc ARM soared 30% on much stronger-than-expected earnings and forecasts. <<<<Special Report by Director Park Moon-hwan to meet in Week 2>>>
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Will it be able to cure the incurable disease?
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PBR times 1 is a criterion that is valued as a so-called liquidation value unless it is in a crisis phase.
It's a concept that started with the justification that the company should liquidate everything, including real estate/stock assets, and evaluate the remaining net asset value.
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However, even though the Korean market is not a typical crisis, it is an undervalued market that is below PBR 1.
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The short profit cycle, the confrontation with North Korea, many factors are blamed for the undervaluation, but the ultimate reason is that governance is unique compared to other countries.
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In the case of overseas, it has a professional management system.
Apple's current CEO Tim Cook is not Steve Jobs' son, is he?
However, since Korea is a child succession structure, governance issues have become a chronic incurable disease.
This is because all policy considerations do not represent shareholder interests and put the Royal Family first.
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To put it simply...
Dividends are taxed on all income, right?
From the owner's point of view, you don't have to receive a lot of dividends.
I'm not happy to see the stock price go up. I'll only pay a lot of inheritance taxes later.  
So there's no way the stock can go up intact.
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Meanwhile, on January 24, financial authorities drew a knife.
I'm going to improve the capital market system to fix the chronic Korea discount. I can't tell you in advance whether it's a success or not because few blueprints have been revealed yet, but it's very positive that financial authorities have begun to pay attention to the stock market, which is relatively weak.
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In particular, I'm going to benchmark Japan, which already has a history of success...
It was March last year, right?
Japan's Tokyo Stock Exchange announced three policies to boost the stock market.
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First, more than 3,300 companies with PBR less than one-fold among their prime and standard markets were required to disclose improvements and specific implementation goals to boost stock prices.
As a result, the companies had to analyze the PBR status and present their target ROE, and describe specific ways to return shareholder profits and growth strategies.
What I couldn't take off just by words is that the stock exchange in Japan has also left open the possibility of delisting if the company fails to raise its stock price as targeted.
In the end, companies could be forced to focus their capabilities on boosting stock prices, even if they were coercive.
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Second, from this year, we decided to publish a list of companies that have made specific efforts to enhance corporate value through corporate governance reports by listed companies every month, and in fact, we began to disclose it for the first time this month.
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Third, in order to attract foreign investors to the Japanese stock market, 150 companies with excellent PBR and ROE were selected separately in the prime market, which gathered Japanese blue-chip companies, and the <JPX Prime Index> was introduced to follow their market capitalization.
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These efforts worked in their own way.
The share of companies with less than PBR1 multiples among Japan's Prime Market listed companies, which reached 51% as of the end of 2022, fell to 44% at the end of last year.
The Nikkei 225 index is up about 25% in the nine months since April 23, meaning that the stock of those PBR stocks has led the way up.
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In particular, the dividend payout ratio has definitely improved, and just by increasing the dividend payout ratio, according to the dividend growth discount model, we were able to significantly increase the appropriate stock price level.
From April last year to March this year, the estimated dividend of Japanese listed companies was 15.22 trillion yen, up about 100 billion yen from the previous year.
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I think our country is trying to do the same.
There must have been a sense of crisis as many countries, including the United States, continued to show signs of stagnation at a time when historical highs were being hit.
The economy has historically been the most important criterion of choice for any administration.
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The Financial Services Commission, the Financial Supervisory Service, and the securities industry announced the improvement of the capital market system in the future at a meeting on January 24, and the most notable of them is the Corporate Value Up Program.
Since I mentioned that details will be announced in February, the stock price of those PBR-related stocks has started to soar to the ceiling.
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The question will be how long this upward trend will last, there's nothing to say because the government hasn't come up with a concrete improvement plan yet, but...
First of all, there are immediate problems and concerns in the future.  
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The immediate problem is that the target of the plan is limited to KOSPI-listed companies with total assets of more than 500 billion won.
It was not until 2026 that it was supposed to be expanded to all listed companies, and of course, the KOSDAQ market, which has a relatively large portion of the market capitalization, had no choice but to escape from the benefits.
In fact, on the day of the announcement, the KOSPI rose and the KOSDAQ fell by more than -2%.
Since then, the KOSDAQ has been relatively weak compared to the KOSPI.
The funds were not newly transfused from the outside, but the trend of selling something to buy that PBR stock continued, making it a particularly disadvantageous material only for KOSDAQ.
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If there is anything worrisome, will we be able to touch our own chronic governance structure.
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As mentioned earlier, the reason why Korea was forced to become a PBR country is because of its governance structure.
For example, overseas, buying treasury stocks mostly leads to incineration.
In fact, compared to January 2010, the S&P 500 index saw a 5% to 6% decline in the number of shares as the shareholding continued.
In the U.S., if there is a profit surplus to the extent that it said it would impose a tax on the purchase of treasury stocks, it is mainly focused on the retirement of treasury stocks.
This, along with the rise in stock prices, leads to the maximization of shareholder profits.
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However, in Korea, there are not many purchases of treasury stocks that can be directly linked to the interests of shareholders, and even if they buy treasury stocks, they rarely incinerate them.
Because it's often used as a means of inheriting or strengthening control later.
There was a lot of paid-in capital increase, let alone incineration, and as a result, the number of shares in the KOSPI increased by 97% compared to January 2010.
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The presence or absence of treasury stock cancellation makes a very important difference.
Even if a company buys treasury stocks, the dividend per stock will increase temporarily because the voting rights of the stock will disappear and dividends will also be suspended, right?
But that's it.
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In addition to buying treasury stocks, even burning them means permanently reducing capital.
So, the return on invested capital increases on the contrary.
This means that ROE will increase permanently.
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ROEX PER = PBR.
Under the premise that the PER given to the industry is constant, it is ROE that determines PBR.
The PBR is relatively high for overseas stock markets because ROE can be pulled up through the retirement of treasury stocks.
However, since Korea does not incinerate its own shares well, the proportion of companies with less than 0.6 times PBR based on the KOSPI in 2023 is abnormal, reaching a whopping 49%.  
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Last weekend, foreigners bought more than 3 trillion won in advance/in kind, right?
I would say that foreigners are very positive about the government's willingness to improve.
Given that that PBR company is such a stock market, if the government works to improve ROE, it will be because the potential for improvement is greater than that of other stock markets.
It means that you can bounce as much as you cringe a lot.
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But.
I don't think Japan's stock market rise was solely due to the government's policy.
Then, what about Germany? What about India?
Was there a similar policy?
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The rise in the Japanese stock market was possible due to inflationary effects and an upward trend due to the reorganization of supply chains.
To put it more bluntly, Japan is a quad participant.
It's definitely stuck with the United States.
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Of course, I'm not blaming us for not participating in the quad.
If you had declared your participation in the quad blindly at a time when you were already too dependent on exports to China, you could have fallen into a deeper quagmire.
However, from the perspective of the United States, when looking at us and Japan, our country would not have been as pretty as Japan.
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What the U.S. wants is a slump in China.
The plan is the most important and unyielding value.
Countries that are joining hands with such values are gaining strength as they benefit from the restructuring of supply chains.
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So I think the stock price will fail to boost to the extent that it just increases its dividend propensity.
We need to make it mandatory to retire treasury stocks and encourage more aggressive shareholder movements, and the problem is that the chronic environment of inheritance or strengthening control has not been solved