Many of these companies have evolved into global champions, competing at the forefront of industries such as technology, manufacturing, consumer goods and healthcare. They have attracted investors from around the world and helped establish Asia as a major destination for capital.
Yet, as the Asia Capital Markets Report 2026 shows, this success story has not always translated into strong stock market outcomes.
Low shareholder returns are hurting company valuations
Across much of Asia, shareholder returns have remained relatively modest. Between 2011 and 2025, Asian markets, excluding Japan, delivered an annualised return of 4%, compared with 9% globally and 12% for the S&P 500. Shareholders have also received a smaller share of corporate earnings. In 2024, the median dividend payout ratio in Asia stood at 37%, against 41% globally.
Rather than distributing earnings or reinvesting them in value-creating opportunities, many companies have accumulated significant cash reserves. In 2024, Asian companies held cash equivalent to a median 16% of total assets, higher than in Europe (10%) and globally (14%). As a result, investors have increasingly questioned whether capital is being allocated efficiently.
The consequence is visible in company valuations. The OECD Asia Capital Markets Report 2026 shows that in 2025, almost 40% of listed non-financial companies in Asia, excluding the People’s Republic of China (hereafter ‘China’) and Japan, were trading below their book value, meaning that the market valued the company at less than the accounting value of its net assets.
One of the most striking features of Asian equity markets is the substantial variation across markets in the proportion of companies trading below book value. In markets that have attracted strong investor interest, such as China, Chinese Taipei and India relatively few companies trade below book value - 7%, 15% and 24%, respectively. Investors in these markets appear more willing to recognise future growth opportunities and corporate earnings potential.
In contrast, more than half of listed companies in Singapore and Thailand trade below book value. Although they operate in economies with solid growth prospects and internationally competitive corporate sectors, many of these firms face challenges in demonstrating their ability to generate attractive returns for investors.
A challenge concentrated in traditional sectors
This valuation challenge also impacts sectors differently. Companies trading below book value are concentrated in a relatively small number of sectors. Traditional industries such as consumer cyclicals and industrials together account for over 25% of low price-to-book companies on average, and basic materials and real estate for 17%.
This points to broader structural shifts in investor preferences. As capital increasingly flows towards sectors linked to innovation, technology and future growth, many companies in more traditional industries have struggled to attract the same level of market attention. Even firms with strong balance sheets and established market positions often find themselves trading at a discount.
Why are valuations so low?
One frequent explanation lies in corporate ownership structures and the incentives they create.
Asian listed companies are characterised by high levels of ownership concentration, and higher concentration often leads to more companies trading below book value. Across the region, the three largest shareholders in a company own more than half of its equity in 52% of listed firms, compared with 44% globally. In Singapore, for example, the three largest shareholders own more than half of the company’s equity in around 70% of listed firms, and 64% of listed companies trade below book value.
The public sector and corporate groups also continue to play a prominent role in many Asian markets. These ownership structures can shape corporate financial policies in ways that prioritise the interests of controlling shareholders over those of minority investors.
This environment often leaves institutional investors with little room to exert influence. In 2025, institutional investors owned just 19% of listed equity in Asia, with significant differences across markets, from 34% in Japan to just 5% in Viet Nam. Institutional investors could play an important role in promoting better capital allocation and stronger shareholder returns. Their size, expertise and engagement capacity often allow them to exert pressure on companies to improve performance and deploy capital more efficiently. An OECD survey shows that when institutional investors engage with Asian companies, the two topics they discuss the most are financial performance and business strategy.
The policy response: Asia’s value-up initiatives
In response to persistent valuation discounts, several Asian jurisdictions have launched ambitious "value-up" initiatives aimed at improving shareholder value and market competitiveness.
The approaches differ but most programmes share common objectives: improving capital allocation, strengthening corporate governance, enhancing disclosure and investor communication, and encouraging companies to focus more explicitly on value creation.
China has adopted a more prescriptive approach, while Japan’s initiative relies on a comply-or-explain framework that encourages companies to explain how they intend to improve corporate value. Other jurisdictions, including Korea, Malaysia, Singapore, Chinese Taipei and Thailand, rely more heavily on voluntary approaches.
The early results have attracted significant attention. Since launching their programmes, Japan and Korea have recorded strong stock market gains, with annualised returns of 31% and 14%, respectively. But beneath the headlines, the picture is more nuanced. Improvements in company valuations have generally been more modest, with gains in some markets concentrated among a relatively small group of large-cap firms.
These experiences highlight an important lesson: valuations cannot be transformed through policy announcements alone.
The effectiveness of value-up initiatives depends heavily on corporate practices as well as broader market conditions, including liquidity, investor participation, corporate governance standards and the credibility of corporate disclosures. Where these foundations remain weak, valuation-enhancing measures are likely to have only limited impact.
Policymakers are increasingly recognising that sustainable value creation matters more than short-term valuation gains. Many markets across the region are strengthening their corporate governance frameworks drawing on the G20/OECD Principles of Corporate Governance.
The focus is shifting towards encouraging companies to allocate capital more effectively, invest in projects that generate returns above their cost of capital, strengthen corporate governance practices, engage more actively with shareholders and enhance transparency. Together, these efforts aim to improve market confidence, support efficient capital allocation and foster long-term value creation.
Ultimately, the Asian valuation challenge is not simply about raising share prices. It is about ensuring that capital markets effectively channel savings into productive investment, reward well-performing companies and support long-term economic growth. Addressing that challenge will require not only company-level changes but also deeper reforms that strengthen market functioning, investor confidence and corporate governance across the region.
