Moon Jae-in won the South Korea elections yesterday.
What does this mean for S.Korea’s businesses?
1) Per Moon’s campaign promise of restricting the power of Chaebols (family owned conglomerates), markets are expecting reforms in their governance (Chaebols put the interest of wealthy families above that of shareholders), hoping it will boost productivity across the economy. Given that Chaebols account for half of S.Korea’s economy, drastic changes look unlikely, but certain soft changes to their governance will most likely see light of the day under Moon’s leadership
2) Moon’s criticism of the US defense system(THAAD) deployment and inclination towards a N.Korea dialogue have raised questions about the future of S.korea-US relationship. This might impact renegotiation of KORUS (free trade agreement) and affect S.Korean exporters
3) China had reacted to S.Korea’s THAAD deployment by boycotting Korean goods and tourism. Markets are hoping that Moon’s take on THAAD will help restore relations with China and help the tourism and retail sector
KOSPI after elections
Removal of political uncertainty has brought back foreign capital flows to the economy. This, along with hopes of fiscal stimulus (Moon’s campaign promise) has been helping fuel the market rally so far. KOSPI is up ~6% since last month.Though stocks have turned volatile post elections from profit taking, the overall sentiment will continue to be positive from hopes of inclusive growth under a corruption free govt. Long-term market prospects, however, will depend on Moon’s ability to enact policies against corruption as also manage the fine balance of relationship with N.Korea, China, and the US.
Read more about the S.Korean stock market here