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Alternative Market Briefing

Dalton led investor group pushes for change in South Korean equities

Friday, February 22, 2019

Bailey McCann, Opalesque New York:

An investor group led by Dalton Investments and including Brandes Investment Partners, KCGI, Value Partners and Ruane, Cunniff & Goldfarb is pushing for change at big South Korean corporates. The group is urging the Korean national pension and the Government of Korea to implement initiatives which will strengthen the governance standards of Korean companies and thereby improve returns across the Korean equities market.

In a letter, Dalton says the group wants Korean companies to focus more closely on shareholder value by increasing dividends and buybacks; and making better decisions about how they spend. "Far too often, companies make investment decisions based on affiliate companies and conglomerates instead of their own shareholders," the letter said. Better management and investor friendly activity could also bolster the investment performance of the national pension plan.

The letter notes that if predictions for a downturn in global growth come true, Korean equities will be even worse off as the market is already defined by "chronic underperformance". The average return for Korean equities is 9 percent, which the investor group claims is the lowest in the world.

"There is a push-pull happening right now between the corporates and what the government wants," says James Lim, a Senior Research Analyst for Dalton's Asia equity research team in an interview with Opalesque. "The government and the pension have said they plan to ......................

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