Bank stocks in South Korea are on the verge of marking their most impressive quarter in over six years, buoyed by investor confidence in the government's commitment to corporate reforms. The Korea KRX Banks Index, which tracks 10 financial stocks across the benchmark Kospi and the smaller Kosdaq indexes, has seen a 19% increase this quarter, outperforming the Kospi's 3.4% rise in the same timeframe.
Investors are rallying around bank shares, spurred by anticipation that the government's "Corporate Value-up" initiative will enhance shareholder returns. The Korea Exchange announced that the details of this program, aimed at boosting valuations through improved management governance, are set to be finalized in May.
According to Seol Yongjin, an analyst at SK Securities Co., the banking sector's first-quarter earnings are expected to reflect provisions and losses related to equity-linked securities (ELS). The sector's future performance will hinge on the successful implementation of the "Value-up" program. Despite the recent rally, some investors, including BNP Paribas, have started to lock in profits by selling their shares in block trades.
Additionally, the banking sector is bracing for the impact of a scandal involving China-linked notes, which is anticipated to affect bank profits negatively.
