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Expectations for the improvement in performance of corporations are rising as the government unveiled a "value-up" program that will target underperformers in the stock market. Investors are increasingly focused on acquiring stocks with a low price-to-book ratio (PBR), in anticipation of them rebounding.

PBR is a metric used to compare a company's market price with its book value. A PBR below 1 suggests that the firm's stock price is undervalued.

According to the Korea Exchange, as of Wednesday, 1,104 corporations listed on the KOSPI and Kosdaq, or 57.68 percent, have a PBR lower than 1.

Despite the increasing number of listed firms over time, the lower valuation of stocks has been persistent in the domestic market. For comparison, in 2014, 806 out of the total 1,863 listed corporations had a PBR lower than 1, accounting for 43.2 percent.

Additionally, there are 513 stocks that have maintained a PBR below 1 for a decade. The most impacted sectors include construction, finance (primarily securities) and retail. For example, GS Construction's PBR decreased from 0.46 in 2014 to 0.25 this year.

In response to ongoing market concerns, the government has announced its intention to launch a corporate value-up program, drawing inspiration from Japan's experience.

Japan's recent achievements, driven by proactive government measures, have significantly reduced the number of companies with a PBR of less than 1. This strategic reduction is acknowledged as a key factor behind the Japanese stock market reaching record highs.

The program by the Korean government aims to initiate a virtuous cycle that will elevate the corporate value of companies with low PBR, thus leading to increases in stock prices and supporting corporate expansion.

Key elements will include the publication of investment metrics like PBR and return on equity (ROE) for listed companies. Additionally, these companies will be recommended to disclose their plans for improving corporate value.

In anticipation of further details set to be announced in February, Korean investors are increasingly drawn to shares considered undervalued. Sectors such as finance, automotive and retail have seen significant stock price increases, with an average PBR of less than 0.8.

"There's a marked preference for stocks with low PBR, aiming for potential valuation gains, even in situations where earnings recovery is uncertain," said Yoo Myoung-gan, an analyst at Mirae Asset Securities. "This trend signifies a move towards specific themes or sectors, arising during times of high macroeconomic uncertainty and lackluster corporate performance."

Market observers posit that the government-led initiative could energize Korea's stagnant stock market, as demonstrated in Japan's example. However, there's a cautious outlook that the policy might prove ineffective without significant changes in corporate behaviors.

"For the PBR of Korean companies to see improvement, an increase in their ROE is essential. The development and execution of strategies to achieve this will be crucial. Without these strategies resulting in concrete actions from the corporations, the impact of such policies may be minimal," said Cho Jun-kee, an analyst at SK Securities.