A new wave of corporate reform is sweeping across Asia, inspired by Japan’s decade-long efforts to enhance shareholder returns, improve corporate governance, and elevate market valuations. From Seoul to New Delhi, governments and regulators are adopting strategies akin to Japan’s, often collectively referred to as “Value Up,” a term popularized by South Korea. These reforms aim to replicate Japan’s success in reinvigorating its corporate landscape and driving the Nikkei 225 Stock Average to record highs.
The timing of these initiatives is critical, as Asia braces for potential economic disruptions stemming from Donald Trump’s adversarial trade policies. For investors, this “Value Up” movement could provide a counterbalance to macroeconomic uncertainties.
The origins of this regional reform push trace back to Japan’s structural initiatives beginning over a decade ago. While progress was slow initially, a pivotal shift occurred in 2022 when the Tokyo Stock Exchange introduced measures urging companies to prioritize shareholder returns. By 2024, these reforms yielded tangible results: increased cash returns to investors, more women on corporate boards, greater openness to activist investors, and a reduction in cross-shareholdings. Japan’s corporate revitalization culminated in the Nikkei 225 reaching unprecedented levels in March, breaking a three-decade stagnation.
Encouraged by Japan’s turnaround, South Korea unveiled its “Corporate Value Up Program” in February 2024. Other nations followed suit: Chinese regulators issued guidelines to bolster corporate valuations, Indian authorities mandated higher dividends from state-owned enterprises, and Singapore, Malaysia, and Thailand began exploring similar initiatives.
Asian markets have historically underperformed their Western counterparts in terms of shareholder returns. The MSCI Asia gauge has risen 30% since late 2014, significantly lagging behind the 190% surge of the S&P 500 Index during the same period. This disparity underscores the need for structural reforms to enhance corporate efficiency and investor appeal.
“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 $1 billion in assets. “This is one factor that can help Asian markets.”
Korea’s reform efforts aim to address the so-called “Korea discount,” where domestic companies trade at lower valuations compared to global peers. Despite these measures, Korea’s Kospi index has declined by over 7% this year. However, officials remain optimistic about the long-term impact of these changes.
India provides a notable example of how “Value Up” reforms can deliver meaningful outcomes. Under Prime Minister Narendra Modi’s leadership, a program launched in 2019 targeted state-owned enterprises (SOEs) to boost dividends and improve profitability. These measures have not only elevated SOEs’ market capitalization to its highest level in six years but also attracted greater investor confidence.
“India’s approach demonstrates how targeted corporate reforms can unlock value for shareholders,” said Vikas Pershad, a fund manager at M&G Investments Singapore. “It’s a timely initiative that aligns with the broader regional trend.”
Despite India’s success, other countries have faced challenges in implementing effective “Value Up” reforms. Korea’s “Corporate Value Up Program” includes a benchmark index tracking companies excelling in capital efficiency and shareholder practices, but it has fallen 5% since its launch. This underperformance highlights the difficulties of achieving immediate results in markets with entrenched inefficiencies.
“Some markets can make this work, but in others, it just won’t drive inflows,” noted Janus Henderson’s Duhra. “For smaller markets, these reforms can feel like clutching at straws to attract investors.”
Yet, fund managers like Vicki Chi of Robeco Hong Kong believe that “Value Up” initiatives offer long-term opportunities for discerning investors. “After we talk about macroeconomic challenges, it’s about companies delivering on earnings and improving returns,” she said. “We are actively positioning for these opportunities in our portfolios.”
In Singapore, a government task force is exploring measures to boost market valuations. These efforts have coincided with a strong performance by the Straits Times Index, which has gained over 15% this year, outperforming regional benchmarks. Fund managers like Mohit Mirpuri of SGMC Capital are optimistic about the long-term impact of these reforms.
“These initiatives can help unlock hidden value,” Mirpuri said. “Encouraging companies to narrow the price-to-book gap signals a stronger commitment to market efficiency and investor trust.”
Elsewhere in Southeast Asia, Malaysia and Thailand are reportedly considering their own versions of “Value Up” programs, focusing on improving corporate governance and enhancing shareholder returns.
While the enthusiasm for “Value Up” reforms is spreading, the approach is not without challenges. Differences in market maturity, regulatory environments, and corporate culture mean that a one-size-fits-all model is unlikely to succeed. For example, Japan’s reforms benefited from a coordinated effort between regulators and the private sector, a dynamic not easily replicated in other markets.
“There’s no magic formula for these reforms,” said Duhra. “It requires a sustained commitment and willingness from both companies and regulators to make meaningful changes.”
Nonetheless, the broader trend suggests a growing recognition across Asia of the need to align corporate practices with global standards. This alignment is crucial for attracting foreign investment and driving long-term economic growth.
The implementation of “Value Up” reforms comes at a time when global investors are increasingly prioritizing companies that demonstrate strong corporate governance and shareholder returns. For fund managers like Vicki Chi, the reforms represent a structural shift that could redefine investment strategies in Asia.
“It’s very important for investors to notice and look for these opportunities,” Chi emphasized. “We are seeing a new paradigm where corporate earnings and returns take center stage.”
As Asia navigates the complexities of global trade and economic uncertainty, the success of these reforms could determine the region’s ability to sustain growth and attract capital. With Japan setting the example, countries across Asia are racing to implement their own versions of “Value Up,” hoping to replicate the Nikkei’s rise and create more investor-friendly markets.
