As a retail investor who holds more than a dozen stocks of large-cap companies here, it's good to see the local stock markets have rallied over the past two weeks, fueled by President Yoon Suk Yeol's comments that the government will do more to resolve the decades-old "Korea discount."

In a town hall meeting with ordinary people on Jan. 17, Yoon said his administration will introduce a comprehensive set of measures in late February to help increase the value of "undervalued" stocks traded on the local bourses. His remarks are largely seen as one of many policy initiatives to help the ruling People Power Party fare better in the upcoming April 10 general elections by appeasing more than 14 million retail investors.

As a follow-up, Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Governor Lee Bok-hyun and other top policymakers quickly stepped in, saying they will soon unveil the "Corporate Value-up Program" to encourage undervalued companies to increase their shareholder values.

The envisioned program mainly targets stocks with a price-to-book ratio (PBR) of less than 1. PBR is widely used to measure whether a company's share price is undervalued, with a number below 1 indicating the stock is likely below a fair value because the market cap is less than the net asset.

The listed firms with low PBR may be asked to disclose how they will increase their corporate worthiness, meaning they will likely be forced to increase dividends or buy back and retire treasury shares. This has prompted investors to snatch up shares of holding firms, retailers, banks, insurers and securities firms whose net assets are worth more than their market caps. In contrast, high-tech stocks have largely been pushed to the sideline due to their high PBR.

The logic behind the program is that by jacking up the prices of low PBR shares, the market cap of KOSPI and KOSDAQ will increase and thus tackle the Korea discount, a phenomenon of Korean equities being undervalued compared to global peers due to regulatory policies, corporate governance and geopolitical risks, among others.

This makes sense to a certain extent, given that the benchmark KOSPI 200's average PBR stood at 0.96 last December, substantially lower than the U.S. S&P500's 4.6 and Japan's Nikkei 225's 1.4.

But will reducing the number of companies with a PBR of less than 1 end the debate about the Korea discount? The answer is "unlikely" if companies don't consider pursuing profits as their top priority.

Some say geopolitical risks associated with North Korea are the main culprit fueling the Korea discount, while others argue low dividends and shareholder-unfriendly corporate governance structure are to blame. But a bigger reason is that many listed firms place other things above profit maximization.

For instance, some companies that undergo generational management shifts appear not too enthusiastic about making money because higher operating profits will drive their share prices higher. This will make the heirs of owner families pay higher inheritance or gift taxes when inheriting shares from their parents and other family members.

Also, Korea's large business groups, known as chaebol, often mobilize profitable units to bail out unprofitable ones. This clearly hurts the interests of those who hold shares in companies that lend money, as it will bring down share prices.

In recent months, Lotte Chemical and other profitable Lotte Group units were mobilized to assist financially-strapped Lotte E&C at the expense of their shareholders. Many other groups have done the same to save their construction and other cash-strapped affiliates. They must stop this dubious practice because it is the root cause of the Korea discount.

The government has also been doing its part in exacerbating the undervaluation of domestic stocks.

Korea Electric Power Corp. (KEPCO), Kangwon Land and other state-run companies that went public still take orders from the government and spend resources to facilitate state policies rather than cater to shareholders' interests.

For instance, KEPCO should charge more for electricity if the power generation costs increase. However, it hasn't been able to do so over the past few years because the government directed it not to raise electricity rates in the name of stabilizing inflation. The utility firm has incurred huge losses as a result, and its share prices have long remained in the doldrums.

If these companies want to accommodate public interest, not shareholders' interest, then they should delist from local bourses. Otherwise, they will continue to remain the cause of the Korea discount.

More importantly, the government must cease interfering in the market and stop acting as a "visible" hand.

For the past few years, policymakers have been pressuring banks to cut dividends and ask them to instead spend more to bail out borrowers. Often, banks were threatened with tax audits or other regulatory probes if they didn't follow "orders." This clearly contradicts market principles, and it is no wonder why financial shares have remained in the pit.

The Korea discount is here to stay for many more years as long as these anti-market practices continue.

Lee Hyo-sik is business editor at The Korea Times.