Koo Yun-cheol's "KOSPI PBR 10" Statement Controversy

The fact that Koo Yun-cheol, the Deputy Prime Minister and Minister of Economy and Finance, responded that the KOSPI Price-to-Book Ratio (PBR) is "around 10" has caused a stir in the financial market. Investors are significantly disappointed with the idea that the head of the Republic of Korea's economy does not understand the 'basics' of stock prices.

The PBR is a key indicator that shows how much the stock price is valued in relation to the company's net assets, and the KOSPI is hovering around 1.0.

On the day the controversy spread (the 20th), the KOSPI continued its decline for three consecutive days, dropping below the 3100 mark at one point during the trading session, and closing at 3130.09, down 21.47 points (0.68%) from the previous day. Amid declining investor sentiment, criticisms arose that "the economic head does not even understand basic indicators."

Error Revealed in National Assembly Response… Opposition: "It’s Devastating"

The controversial statement was made during a session of the National Assembly's Planning and Finance Committee on the 19th.

When Lee So-young, a member of the Democratic Party, asked, "Do you know what our KOSPI PBR is?", Deputy Prime Minister Koo replied, "Around 10." In response, Lee immediately corrected him, stating, "The KOSPI is 1.0. Taiwan is 2.4, Japan is 1.6, and the average for emerging countries is 1.8." She then pointed out, "The KOSPI is vastly undervalued, and the government's policy efforts have disappeared since July."

According to the Korea Exchange, as of the 18th, the KOSPI PBR was 1.07. If it were at the 10 times level, the KOSPI index would need to surpass 30,000.

Criticism from the opposition continued. Cheon Ha-ram, floor leader of the Reform Party, stated on a radio show on the 20th, "Is there even a minimum interest in the stock market? It’s very devastating," and added, "If a PBR of 1 means significant undervaluation, how can you lead the market if you can't even understand that situation?"

Investors and Former Officials Criticize

Domestic individual investors, known as "Donghak ants," expressed their anger online.

Comments such as "I have to clean up the chief," "Inconceivable incompetence," "The level of the Deputy Prime Minister is enormous," and "Isn't it grounds for impeachment?" flooded the discussion. Some pointed out that "the lack of understanding of the market is what makes tax reforms a mess."

Current and former political figures also voiced their concerns. Lee Seon-woong, a former administrative official at the Blue House, criticized, "The recent policies of the Ministry of Finance are far from a KOSPI of 5000," and stated, "With this perception, all reasons for the decline in stock prices can ultimately be attributed to the government."

This statement extends beyond a simple mistake to a matter directly related to the credibility of government economic policies and market stability, indicating that the fallout is unlikely to easily subside.

Image sources: Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance / News1, unrelated material photo / gettyimagesbank, News1