A Japan-inspired strategy of seeking to boost shareholder returns, corporate governance and market valuations is spreading like a wildfire across Asia.
From Seoul to New Delhi, governments and regulators are hurrying to implement their own versions of Japan’s decade-long programme of structural reforms that helped drive its benchmark index to a record high this year. While these initiatives vary, they are often collectively referred by the term coined by South Korea: “Value Up.”
The timing looks to be fortuitous for investors: Donald Trump’s election victory this month and his adversarial trade policies threaten to undermine Asia’s economic growth and corporate earnings. There are already some signs “value up” can counter this threat.
“When I present to my clients, I tell them that there are five great themes in Asia” and one of them is corporate reforms to enhance shareholder returns, said Sat Duhra, a fund manager at Janus Henderson Investors in Singapore, who manages US$1 billion. “This is one factor that can help Asian markets.”
The swelling tide of “value up” can be traced back to Japan’s effort to improve corporate governance that began more than a decade ago. Despite a lack of success early on, investors began to take notice from 2022 when Tokyo Stock Exchange started to pressure companies to boost shareholders returns via a range of measures.
Two years later, Japanese firms are returning more cash to investors. They have also boosted the number of women on boards, become more open to working with activist investors, and unwound some of their cross-shareholdings. The Nikkei 225 Stock Average climbed to a record in March, finally shaking off three decades of inertia.