A KKR-backed KKR.N marine services firm may help South Korea catch up. Thanks to the artificial intelligence craze and geopolitics, equities across Asia are having their moment. The KOSPI 200.KS200, though, has risen just 4% since the start of the year, underperforming benchmark indices in Japan, Taiwan and even Hong Kong. Wednesday's successful debut of HD Hyundai Marine Solution 443060.KS, which surged more than 40% in early trading, should buoy sentiment.
Despite boasting global champions in semiconductors, autos and more, South Korea's $1.8 trillion stock market suffers from an anaemic valuation. Blame powerful family-controlled conglomerates and weak corporate oversight. Taking a page out of Japan's big push to improve shareholder returns - which has helped lift the Nikkei 225 Index.N225 16% this year - South Korea's stock market watchdog in February unveiled its "Corporate Value-up Program".
Since then, overseas investors have bought a net $7 billion-worth of stocks, data from Korea Exchange show, helping boost foreign ownership of the KOSPI.KS11 to roughly 35% as of early April - a three-year high. That's not bad, but with the Nikkei ascending this year to record levels, South Korea is lagging behind.
That's partly self-inflicted. Last year, financial authorities banned short-selling. At the time, critics accused the government of meddling to please a huge constituency of retail investors ahead of parliamentary elections. The ban is set to expire next month but has probably dampened sentiment, particularly for institutional investors suddenly unable to hedge their positions.
Against this backdrop, a lot was riding on HD Hyundai Marine Solution's initial public offering - the country's largest float in more than two years. On paper, there's plenty to like about the company, which specialises in marine services spanning repair, maintenance and reconstruction. Earnings surged 44% last year to 151.1 billion won ($111 million), thanks to booming demand from ships going green. These eco-friendly vessels require more servicing and parts than conventional ones.
Better yet, the company is part of the HD Hyundai shipbuilding-to-oil refinery conglomerate and counts private equity heavyweight KKR as a major shareholder. Institutional investors bid for 200 times the amount of shares on offer, IFR reported, with allocations "heavily skewed" towards long-only funds.
At the very least, the strong debut should nudge other IPO hopefuls such as online lender K Bank, fintech darling Viva Republica and Tencent-backed 0700.HK video-games developer Shift Up. South Korea's markets are primed to go full steam ahead. — Reuters
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