On the 12th, the KOSPI index jumped more than 3%, surpassing even ‘5,500p’. As of today, its year-to-date return has exceeded 30%. Whereas gains had previously been led mainly by bellwethers represented by ‘electronics·automobiles·shipbuilding·defense·nuclear’, recently, on top of semiconductors, an expansion of shareholder returns and active moves by activist funds have picked up, spreading warmth to other stocks as well. As this will be the first regular shareholders meeting since the Commercial Act revision, there is an outlook that expectations for shareholder returns and governance improvements will have a positive effect on the market.

The KOSPI closed at 5,522.27, up 167.78 points (3.13%) from the previous session, setting new all-time intraday and closing highs after six trading days. At the open, it crossed the 5,400 level, and with broad strength across semiconductors as well as large and mid caps, it quickly topped 5,500 too.

With the advance, the KOSPI year-to-date return came to 31.04%, topping 30%. In just a month and a half, it has reached about 41% of the rise recorded last year (75.63%).

Although individuals engaging in profit-taking recorded an all-time largest net sell of 4.4503 trillion won on the main board that day, foreigners were net buyers of 3.0139 trillion won and institutions 1.3697 trillion won, lifting the index.

The protagonist of the KOSPI rally is ‘semiconductors’. Reflecting strength in U.S. semiconductors, Samsung Electronics leaped 10,800 won (6.44%) to close at 178,600 won, capturing the ‘170,000-won Samsung’ milestone for the first time. Intraday it surged more than 7% to as high as 179,600 won. This was helped by foreigners going on a ‘buy’ of 2.6 trillion won of Samsung Electronics (including preferred shares).

Financials moving to expand large-scale shareholder returns also soared. The four major financial holding companies (KB·Woori·Shinhan·Hana) have jumped more than 20% just this month. Following the government tax law revision last year, from this year ‘separate taxation of dividend income’ is to be applied to companies with a dividend payout ratio of 40% or more, or to high-payout companies that increased dividends. In line with this, banks have increased dividends and moved to expand shareholder returns.

Shareholder activism gaining momentum ahead of regular shareholders meetings is also cited as one of the supporting forces behind KOSPI strength. UK-based activist fund Palliser Capital submitted shareholder proposals to LG Chem, domestic activist fund Align Partners sent shareholder letters to DB Insurance and Coway, and Truston Asset Management sent one to KCC. The reason is the perceived need to enhance shareholder value.

On the 11th, after Truston urged KCC to dispose of its 10.01% stake in Samsung C&T that it had taken on as a ‘white knight’ during the 2015 Samsung C&T-Cheil Industries merger, KCC shares jumped 12.16% at the close.

Lee Nam-woo, head of the Corporate Governance Forum, said, “In countries like Korea where many companies are undervalued due to governance issues, when activists act, there is an externality through which other shareholders and stakeholders gain indirect benefits.”

As these moves are expected to continue through the regular shareholders meetings in March, there is an outlook that they will have a positive impact on the index as well.

Byun Jun-ho, a researcher at IBK Investment & Securities, said, “Ahead of the March shareholders meetings, renewed expectations for shareholder returns are expected to be reflected, centered on companies where substantive and proactive shareholder-friendly policies are being mentioned,” adding, “Dividend increases, and companies expanding share buybacks and cancellations, could be factors that create an additional rally.”