Lex: Korean stocks [FT]
Wednesday July 13, 1:50 pm ET
At first glance, Posco's decision to list shares in Tokyo looks supremely logical. The steelmaker rides the same cycle as the rest of its peers, but attracts a more lowly valuation.
By crossing the water, Posco hopes to tap Japan's massive savings pot and pick up some of the premium accorded local steel stocks. These trade at roughly double Posco's multiple of 3.5 times estimated 2005 earnings.
Certainly, Posco gleams brighter beside its Japanese rivals, offering a chunkier dividend yield and bolder overseas strategy. Experience, however, suggests it will be disappointed. Although this marks Korea's first Japanese listing, around 35 Korean companies sell depositary receipts overseas. That has had little impact on stock prices. Posco itself is close to historic lows and and its depositary receipts trade at a premium of only 1 per cent to its shares.
Partly, this is fundamental: Korean companies bring their baggage with them, be it political risk from the North or government meddling. There are technical reasons too. Korea is one of Asia's most open markets, with foreign ownership at around 40 per cent. Arbitrage quickly whittles away glaring anomalies in share prices unlike in India, say, where shares and depositary receipts are not fully fungible. Attracting a Korean blue chip is good for the Tokyo Stock Exchange. But for Posco, selling 4 per cent of its shares in Japan is unlikely to achieve much, when listing 29 per cent in the US and UK has failed to improve its rating.
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