Last week (May 26-30), the KOSPI index closed about 4% higher than the previous week. The Bank of Korea's interest rate cut, the strong performance of artificial intelligence (AI) semiconductor corporation Nvidia, and the Trump administration's ruling on the "reciprocal tariff" had a positive impact on investor sentiment. Domestic and foreign institutions bought approximately 1.8 trillion won worth of securities, driving the stock index up.
This week (June 2-6), a major event is the 21st presidential election (3rd). Some speculate that as the market's expectations for the candidates' pledges and policies have already been priced in, the stock market may decline again after the election concludes. On the other hand, others believe that the end of the election will be interpreted as a signal for the resolution of uncertainty, leading to a bullish market.
◇ Tariff concerns eased; interest rate cut breaks record highs
According to the Korea Exchange on the 1st, last week's KOSPI index closed at 2,697.67. It surged more than 2% on Monday, the 26th, and continued to rise over 1% on the 28th and 29th, reaching a record high of 2,720.64. However, it fell by 0.84% on the 30th, dropping below the 2,700 mark.
One of the main factors driving our stock market's rebound last week was the court's ruling on the Trump administration's reciprocal tariff. The U.S. Court of International Trade (CIT) concluded on the 28th (local time) that President Trump's decision to impose tariffs on a global scale exceeded government authority. The U.S. government attempted to impose extensive tariffs on imports based on the "International Emergency Economic Powers Act (IEEPA)"; however, the CIT deemed this illegal.
On the 28th, there was also positive news regarding the Bank of Korea's interest rate cut. That day, the Bank of Korea's Monetary Policy Committee convened and decided to lower the benchmark rate from 2.75% to 2.5%, a decrease of 0.25 percentage points. This marks the fourth interest rate cut since October of last year.
News that the global AI leader Nvidia's first-quarter results exceeded consensus (average forecasts of securities firms) also served as positive news for our stock market. Nvidia reported earnings per share of 96 cents for the first quarter, exceeding the consensus of 93 cents. Revenue during the same period was also $44.06 billion, surpassing the consensus of $43.31 billion.
With multiple positive factors at play, domestic institutions purchased 1.598 trillion won, and foreign investors bought 253 billion won in the securities (KOSPI) market over the week, propelling the bull market. Both domestic institutions and foreign investors also bought securities worth 134 billion won and 309 billion won, respectively, in the KOSDAQ market.
Domestic institutions concentrated their buying power on Samsung Electronics and SK hynix. A total of 721 billion won was net purchased for the two stocks over the week. The stock most purchased by foreign investors was Samsung Heavy Industries, with a total purchase of 254 billion won. Hyundai Rotem followed with 213 billion won.
◇ "Presidential election positives priced into stock market" VS "Foreign capital inflow after confirmation of value-up policies"
This week, the outlook for our stock market among securities firms is mixed. Some express concern that once the next president is confirmed, stock prices, which rose based on expectations of the presidential election, may return to their previous levels.
Na Jung-hwan, a researcher at NH Investment & Securities, noted, "Recent expectations regarding the candidates' market support policies (such as amendments to the Commercial Act) have positively influenced stock prices, but after the election on the 3rd, once the next president is confirmed, profit-taking may occur in stocks that have risen due to the candidates' pledges."
In fact, statistics since 2000 indicate that the KOSPI index has averaged a 2.3% decline one month after a presidential election.
On the other hand, there is also a forecast that a bull market will continue even after the election. Woo Ji-yeon, a researcher at DS Securities, explained, "It is true that the presidential election effect has been priced in and that the stock market generally declines after such events, but the current environment is favorable for expanding foreign investor influx, suggesting that the stock index will continue to show a good trend for the time being."
Na Jung-hwan also analyzed that if policies that expand the dividend payout and stock buybacks, such as the amendments to the Commercial Act, are implemented, there is a possibility of foreign capital inflow thereafter.
Those who believe that the "presidential election effect" will persist after the 3rd particularly note that value-up will continue to be important in the next government. Lee Jae-myung, the candidate from the Democratic Party of Korea, used the term "boost-up" instead of value-up and set a goal of "breaking 5,000 for the KOSPI." Kim Moon-soo, the candidate from the People Power Party, is also promoting policies to boost the stock market by offering tax benefits to those holding stocks and funds long-term.
Companies with a high likelihood of increasing dividends include Mirae Asset Life Insurance (current dividend rate 0%), Amorepacific Corporation (3.4%), Hyundai Mobis (13.1%), and Hankook Tire & Technology (15.1%). Companies with a price-to-book ratio (PBR) of less than 1 and a high likelihood of stock buybacks include Amorepacific Corporation, Samsung C&T, and DB Insurance.
The securities industry also predicts that both candidates emphasize nurturing the AI and defense sectors, which may lead to rising stock prices for related companies. The securities industry identifies Saltlux, Lunit, and MNC Solutions as benefitting stocks.
In addition to the presidential election, uncertainty remains regarding the U.S. tariff policy, which is also a variable.
The Trump administration requested an immediate stay of the CIT's ruling nullifying the reciprocal tariff, which was granted on the 29th of last month (local time). This made the imposition of reciprocal tariffs temporarily possible just one day after the CIT's ruling, which acted as an immediate drawback for our stock market on the 30th.