Young Poong, MBK Seek Court Order Blocking 5% of Korea Zinc Votes

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. Young Poong, MBK Seek Injunction Blocking Korea Zinc Voting Rights, a Wild Card for Special Meeting

- Key summary: Young Poong and Korea Corporate Investment Holdings, a special purpose company (SPC) on the MBK Partners side, filed a petition on the 21st with the Seoul Central District Court seeking an injunction barring Korea Zinc Chairman Choi Yun-birm and others from exercising voting rights. The petition asks that voting rights be restricted on 1,040,545 shares, or roughly 5% of the company, held by Choi and 14 people including relatives, at a special shareholder meeting to be held on the 9th of next month. Young Poong and MBK contend that Choi's side made false disclosures in April this year when it borrowed 541.1 billion won ($389 million) through an SPC, P23 Partners, to acquire Bain Capital's stake. At the core of the claim is the assertion that the actual lenders and pledgees — JB Woori Capital, The Kwangju Bank, The Jeonbuk Bank, Meritz Capital and Meritz Fire & Marine Insurance — were left out of the initial disclosure, which listed only Meritz Securities (008560), the arranger, as the source of the borrowing. Market participants are watching the possibility that the disclosure amounts to a deliberately false filing, and an investment banking (IB) industry official said the possibility that the actual lenders and collateral holders were deliberately omitted amid a management control dispute cannot be ruled out.

2. Shareholder Returns Fail to Lift Share Prices: Japan's 'High-Dividend Trap'

- Key summary: Cash dividends declared by listed Korean companies in the first half of this year totaled 43.2 trillion won, about 85% of last year's full-year total of 50.9 trillion won. Treasury share cancellations came to 21.4 trillion won last year, more than quadrupling in two years and exceeding acquisitions of 20.1 trillion won for the first time. Under the revised Commercial Act that took effect in March this year, newly acquired treasury shares must be canceled within one year and existing holdings by September next year, pointing to an even clearer trend toward returns. Japan's largest telecommunications company, NTT, raised its dividend for 16 straight years, yet its shares rose only about 7.5% this year, far below the Topix's 20.6% gain. By contrast, Japan's megabanks, where an earnings recovery and expanded returns coincided with rate normalization, saw the Topix banking index climb about fivefold from the start of 2022. In Korea, POSCO Holdings (005490) and Hyundai Motor (005380) also failed to win a re-rating despite aggressive return policies, while an SK Securities (001510) analysis rated semiconductors highest among all sectors, with an earnings momentum score of 100 even though the sector's dividend payout ratio was just 15.5%.

3. Talk of September Rate Hikes Spreads in Japan, Europe Under Growing Price Pressure

- Key summary: In a Reuters survey of economists conducted from the 17th to the 24th of this month, 57% of respondents expected the Bank of Japan to raise its policy rate in September. That marks an abrupt shift in one month from the previous survey, in which only 5% expected a third-quarter increase. Some analysts projected further increases in October or December, taking the rate as high as 1.5% by year-end. The Bank of Japan raised its policy rate in June to 1%, the highest in 31 years, but inflation concerns tied to the war in Iran and yen-selling pressure from the U.S.-Japan rate gap have persisted. European Central Bank policymakers are also reported to be preparing a 0.25 percentage point increase in September, while in the United States, the boards of four regional Federal Reserve banks — Dallas, Cleveland, Minneapolis and Kansas City — submitted opinions in July favoring a 0.25 percentage point increase in the discount rate.

4. Amid Global Rate Jitters, China Creates a Booming Market for Korean Paper

- Key summary: Even as interest rates in the United States and other major economies have jumped to their highest levels, Korean companies are flooding overseas markets with foreign currency-denominated bonds known as Korean paper. The Export-Import Bank of Korea raised 625 million New Zealand dollars, or about 515.6 billion won, from global institutional investors the previous day, its first funding in New Zealand in nine years since 2017. The Korea SMEs and Startups Agency also confirmed a $400 million issue on the 19th of this month, recording the lowest spread among fixed-rate foreign currency bonds of the same maturity issued by a Korean public agency, while KB Securities secured $300 million for the first time in seven years. With the U.S. 30-year Treasury yield holding in the high 5.2% range as of the 26th local time, Kim Sang-in, an analyst at Shinhan Securities (008670), said rising domestic bond yields have narrowed the funding cost gap between won-denominated and foreign currency bonds, making foreign currency issuance increasingly attractive. Chinese institutions, meanwhile, which have accounted for 70% to 80% of orders in book-building for Korean corporate foreign currency bonds, again deployed capital aggressively this month and are seen as having filled a supply-demand gap during the off-season.

5. Chill Hits Single-Stock Leveraged Products as Turnover Plunges 90%

- Key summary: Daily turnover in 16 single-stock leveraged and inverse 2X products based on Samsung Electronics (005930) and SK hynix (000660) came to 842.9 billion won as of the previous day, down 90.4% from a three-month daily average of 8.7696 trillion won. All 16 products, listed on May 27 this year, closed below their 20,000-won listing reference price as of the 26th, the result of accumulated negative compounding as the underlying assets repeatedly surged and slumped under a structure that tracks twice the daily return. Over the past month, 1.0482 trillion won flowed out of the five products with the largest outflows alone, while TIGER U.S. S&P500 drew a net inflow of 1.0434 trillion won, the most of any exchange-traded fund (ETF). Financial authorities, meanwhile, raised the basic deposit requirement to 30 million won in cash starting on the 31st of last month, and from the 19th of this month have required new investors to complete five hours of simulated trading over five trading days.

6. Korea's Three Aramid Makers Ride AI Boom to Fend Off Chinese Push

- Key summary: Kolon Industries (120110), HS Hyosung Advanced Materials (298050) and Taekwang Industrial (003240), the three Korean producers of para-aramid, are moving to improve profitability on the back of spreading artificial intelligence (AI) data centers. Para-aramid is a high-performance industrial fiber with tensile strength five times that of steel that withstands temperatures above 500 degrees Celsius, serving as a key reinforcing material that prevents sagging and breakage in optical fiber cables. Prices for commodity-grade products collapsed after large-scale capacity expansion by Chinese producers, but as demand for AI data center infrastructure translates into orders, IBK Investment & Securities projected that data center demand for para-aramid could grow by as much as 16,000 tons above current levels by 2028. Exports of high-tenacity aramid filament yarn came to $105.04 million, or about 145.3 billion won, in the January-July period, up 8.8% from a year earlier, and Kolon Industries' plant is currently running at full capacity.