00:00Stock price has not been the guiding factor of Korean companies.
00:04I mentioned these utilities holding companies before.
00:07That was back in the 1920s in the U.S., before the establishment of the SEC.
00:13Well, Korean companies have looked like that through most of the modern era.
00:17It was only this past year, not even a full year ago,
00:21that Korea enshrined the rights of shareholders into their corporate code.
00:28So companies now have a fiduciary duty to shareholders to provide fair and equitable treatment.
00:34And that is going to change a lot of the behavior of how companies act
00:38and how these holding companies and these families that run them, the trebles, how they act.
00:43Korea has been dominated by these trebles.
00:46And one of the main things that they've been trying to avoid is inheritance tax.
00:50So a lot of the governance issues have been related to different structure transactions
00:55they would do to depress the value of the assets in order to minimize their inheritance tax burden.
01:02But now they realize they can't do this.
01:04It's like a fraud in the other direction, kind of, right?
01:07Exactly. Yep. Exactly.
01:09So it's a fraud to make things cheaper, not more expensive.
01:11Right.
01:11The other interesting dynamic with these trebles is that they're now either entering or exiting their third succession.
01:19So you have a new generation of owners that are much more globally oriented.
01:23So they're much more willing to engage.
01:26So the companies that I'm looking at in Korea are not the ones that are the high flyers.
01:31I'm not looking at Samsung and SK Hynix.
01:34I'm looking at the businesses that don't have as much experience with foreign markets,
01:39that have sort of been bogged down by these corporate structures over the past couple of years.
01:44And this new generation doesn't really know how to rid themselves of that history.
01:49And traditionally, these Korean retail investors have stayed away from Korean equities
01:53because of the bad experience holding these treble companies that have these depressed value.
01:58But now the financial regulator just announced recently that if you are a company on the COSPY
02:05where you're trading below book value, you will be named and shamed.
02:10So that will be a great place to start.
02:13That is a change, yeah.
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