A strategy inspired by Japan’s decade-long corporate reforms is rapidly gaining momentum across Asia, with countries from South Korea to India implementing initiatives aimed at boosting shareholder returns, enhancing corporate governance, and improving market valuations. Dubbed “Value Up,” this approach has become a powerful tool for investors seeking stability amid global uncertainties.
The timing of this movement couldn’t be better. With challenges looming from Donald Trump’s recent election win and potential trade policies that could undermine Asia’s economic growth, experts are hopeful that these structural reforms could provide much-needed relief to investors.
Sat Duhra, a fund manager at Janus Henderson Investors in Singapore, emphasized that corporate reforms to improve shareholder returns are one of the key themes for Asian markets. “This is one factor that can help Asian markets,” he said, managing a portfolio worth $1 billion.
The origins of the “Value Up” movement trace back to Japan’s efforts to improve corporate governance over a decade ago. Initially slow to take off, these reforms began to show positive results from 2022 onward, as the Tokyo Stock Exchange pushed companies to return more cash to investors, increase diversity on boards, and embrace activist investors. The reforms culminated in the Nikkei 225 Stock Average hitting a record high in March, shaking off years of stagnation.
Inspired by Japan’s success, South Korea launched its “Corporate Value Up Program” earlier this year, aiming to boost corporate valuations and combat the so-called “Korea discount,” which sees South Korean companies undervalued compared to global peers. China followed suit with new guidelines this month to improve corporate valuations, while India has focused on boosting dividends from state-owned enterprises. Singapore, Malaysia, and Thailand are reportedly considering similar initiatives.
Vikas Pershad, a fund manager at M&G Investments in Singapore, praised these regulatory actions, calling them “timely” and offering a positive outlook for the region. “This is a good example of how more regulation can be helpful,” he said, noting that he has made this a focal point in discussions with his clients.
Despite the promising momentum, the results so far have been mixed. For instance, while India’s state-owned enterprises have seen a surge in dividend payouts and higher earnings since reforms began in 2019, Korea’s Kospi index has dropped more than 7% this year, despite the introduction of several shareholder-focused measures. Additionally, the Korea Value-up Index, which tracks companies with strong capital efficiency, has fallen about 5% since its introduction two months ago.
Some analysts remain skeptical about the impact of these reforms in smaller markets. “In certain markets, it’s not going to be a significant driver of investment inflows,” said Duhra, pointing out that smaller nations may be grasping at straws in an attempt to boost interest from investors.
However, many fund managers continue to view “Value Up” as an opportunity. Vicki Chi, an equity manager at Robeco in Hong Kong, emphasized the importance of identifying companies that are improving earnings and returns. “We are very actively seeking and continuing to position for these opportunities in our portfolios,” she said.
In Singapore, where a government task force has been formed to explore ways to enhance market valuations, SGMC Capital remains optimistic about the potential long-term rewards of “Value Up” initiatives. The Straits Times Index has risen over 15% this year, outperforming the regional Asian benchmark and approaching a record high.
“These initiatives can help unlock hidden value,” said Mohit Mirpuri, a fund manager at SGMC Capital. “Encouraging companies to narrow the price-to-book gap signals a stronger commitment to market efficiency and investor trust.”
As the “Value Up” strategy continues to spread across Asia, the potential for improved corporate governance and shareholder returns may offer a vital counterbalance to external economic pressures, paving the way for more sustainable growth in the region.