The Day KOSPI Broke 6,000: Can Korea's 3rd Commercial Act Amendment (Mandatory Treasury Share Cancellation) End the Korea Discount?

One-line hook: On the very day the Commercial Act amendment passed, KOSPI pierced 6,000 points for the first time in history — not a coincidence, but the culmination of three years of shareholder rights reform.

TL;DR

• On February 25, 2026, the 3rd Commercial Act Amendment mandating treasury share cancellation passed with 175 votes in favor (1 abstention)
• KOSPI broke 6,000 points for the first time on the same day, up 49.7% year-to-date — the world's best-performing market
• Companies must cancel treasury shares within 1 year of acquisition (existing holdings within 1 year and 6 months); violations carry a fine of up to ₩50 million per director
• Nomura forecasts KOSPI to reach 8,000 in the first half, KB Securities sees an upper target of 7,500
• 62.5% of the business community opposes mandatory cancellation — the debate over policy effectiveness continues

Facts: What Happened

On the afternoon of February 25, 2026, led by the Democratic Party, the 3rd Commercial Act Amendment passed the National Assembly plenary session with 175 votes in favor and 1 abstention out of 176 members present. The People Power Party, which had been conducting a filibuster (unlimited debate) since the previous night, did not participate in the vote.

The key provisions of the amendment are as follows:

• Newly acquired treasury shares: Must be cancelled within 1 year of acquisition
• Existing treasury shares: Must be cancelled within 1 year and 6 months of the law's effective date
• Exceptions: Holding or disposal permitted with reasonable justification (e.g., executive compensation, employee stock ownership) plus annual shareholder meeting approval
• Violations: A fine of up to ₩50 million imposed on the relevant directors

This 3rd amendment follows the 1st amendment (expanding the scope of directors' fiduciary duty to include 'shareholders') and the 2nd amendment (mandatory cumulative voting and expanded separation of audit committee member elections), completing the trilogy of shareholder value enhancement legislation the Democratic Party pursued over two years.

Drivers: Which Came First — KOSPI 6,000 or the Amendment?

KOSPI had been hitting record highs daily since early in the year, when anticipation for the amendment's passage intensified. And on February 25, when the bill actually passed, the index finally surpassed 6,000 points.

There are three mechanisms by which treasury share cancellation drives stock prices higher:

1. Automatic increase in per-share value: Reducing the number of shares outstanding increases EPS (earnings per share) and dividends
2. Permanent elimination of potential selling overhang: KB Securities analyst Gang Seung-geon analyzed that "treasury share cancellation structurally eliminates overhang"
3. Expected change in management behavior: As the need for shareholder support grows, incentives emerge for more active shareholder returns and earnings improvement efforts

The KRX securities index surged 95.46% year-to-date, led by financial stocks (insurance and banking) with high treasury share ratios.

Context & Background: 30 Years of the Korea Discount

The 'Korea Discount' refers to the phenomenon of Korean companies trading at lower valuations than foreign competitors with similar performance. The main causes have long been cited as opaque governance centered on controlling shareholders, use of treasury shares for management entrenchment, and weak minority shareholder rights.

The three-phase Commercial Act reform is an attempt to structurally dismantle this system. The Electronic Times assessed that it "is likely to serve as an institutional signal to foreign investors that the Korea Discount is being resolved."

The semiconductor supercycle is also a backdrop. Earnings forecasts (12-month forward EPS) are being revised upward by 37.6% and 41.7%, respectively, for 2026 and 2027 compared to the start of the year — an exceptional situation.

Outlook: How Far Will the Market Go?

Major securities firms' KOSPI forecasts are optimistic.

Potential beneficiary stocks: KB Securities identified large-cap stocks (market cap over ₩5 trillion) with a controlling stake decline of less than -5%p assuming full treasury share cancellation, and treasury shares exceeding 10x retained earnings. These include Kia (147x), SK Telecom (157x), NH Investment & Securities (162x), Samsung Electronics, NAVER, Shinhan Financial Group, and Hana Financial Group.

However, risks also exist:

• 62.5% of companies holding over 10% in treasury shares oppose mandatory cancellation, according to a Korea Chamber of Commerce survey
• 60.6% responded they "would not buy treasury shares at all if it becomes mandatory"
• Possibility of short-term correction if global economic slowdown or dollar strengthening resumes

Checklist: What Investors Should Verify Now

Reference Links

• 3rd Commercial Act Amendment passes — treasury share cancellation mandate may heat up markets further — Hankyoreh
• KOSPI breaks 6,000 on semiconductor and Commercial Act amendment tailwinds — Electronic Times
• 'Not all high-treasury-share stocks will cancel' — selecting true beneficiaries — Edaily
• Nomura: 'KOSPI to reach 8,000 in H1' — TopStarNews
• KOSPI 6,000 'Not a bubble — it's the power of earnings' — Chosun Biz