Financial stocks not attractive enough for foreigners despite revised Commercial Act

By Yi Whan-woo

Major financial holding companies rarely attract new foreign investors on the stock market, despite the recent passage of a revision to the Commercial Act, which was anticipated to boost undervalued stocks.

For years, these companies were grouped as undervalued stocks despite massive earnings driven by their banking affiliates’ interest incomes.

The companies were often criticized for relying on “windfall profits” and faced pressure from financial authorities on sales policies. The regulatory pressure negatively affected investor sentiment.

The interest income-reliant business portfolio also negatively affected investor sentiment, as diversifying portfolios was seen as crucial to survive in the rapidly evolving financial industry.

Under the circumstance, the revised Commercial Act fueled speculation that financial stocks would gain traction, especially from large investors such as foreigners.

Approved by the National Assembly on March 13, the amendment to the legislation expands corporate directors’ duty to shareholders and, therefore, enhances shareholders’ rights for returns.

Nevertheless, KB Financial Group saw the ratio of foreign investors slightly falling — from 78 percent at the end of 2024 to 75.47 percent after the bill's passage.

During the same time period, the Shinhan Financial Group’s ratio of foreign stock ownership dropped from 61 percent to 58.84 percent, and Hana Financial Group’s ratio ticked down from 68 percent to 67.12 percent.

Woori Financial Group was the only major financial group whose ratio of overseas investors did not fall., remaining steady at the 45 percent range.

“The fall in foreign stock ownership indicates that the revised Commercial Act will not be a game changer to boost financial stocks,” Jung Eui-jung, head of the Korean Stockholders’ Alliance, said.

Jung said the financial groups should rather enhance business diversification and other measures that can “be more appealing to new foreign investors.”

He pointed out that BNK Financial Group, a lesser-sized financial holding company from Busan, has been drawing overseas investors due to its “clear-cut” commitment to the government-led Corporate Value-up Program.

Foreign investors accounted for 41.9 percent of BNK Financial Group’s stock owners after the passage of the revised Commercial Act, ticking up from 41.05 percent on March 5.

“BNK Financial Group has been active in running overseas campaigns to promote its vision and sales activities with regard to digital transformation,” a market observer said.