South Korea's Financial Services Commission consults on criteria to publicly identify low price-to-book companies, with 120 to 220 firms estimated

South Korea's Financial Services Commission and Korea Exchange published draft criteria for a regime that would publicly identify companies with persistently low price-to-book ratios. Companies would generally be identified if they rank in the bottom 25% of KOSPI companies or bottom 10% of KOSDAQ companies within their industry for six consecutive half-year periods. Rankings would be calculated across 11 Global Industry Classification Standard sectors, with an anti-avoidance test covering companies that exceed the threshold only once during the six periods. A company could receive a one-year exemption by disclosing a corporate value enhancement plan that includes an analysis of its low ratio, targets, improvement measures and an implementation assessment. The exemption would not apply to companies that have remained below the relevant threshold for 12 half-year periods. Korea Exchange simulations indicate that about 120 to 220 companies, representing 5% to 10% of KOSPI and KOSDAQ issuers, could be identified. Lists would be published on the exchange's disclosure website on the first trading day of May and November, with low price-to-book tags also displayed through brokerage trading systems. Korea Exchange plans to begin the formal consultation on Aug. 5 and accept comments through Aug. 24, followed by regulatory approval in September. It expects to establish a company lookup system that month and publish the first list on Nov. 2. For this initial publication, a company whose ratio exceeds the applicable threshold on the Oct. 22 calculation date would be excluded under a transitional rule.