Will the KOSPI index rise to 5,000 points under Lee Jae-myung's government? Investors are focusing on the domestic stock market's trends following the presidential election. Generally, a 'honeymoon rally' is observed during the first year after a new government takes office, and this elected individual has emphasized that he will take definitive responsibility to ensure the stock index can trend upward toward 5,000, making revitalization of the domestic stock market a top priority. In fact, analysts in the securities industry suggest that while reaching 5,000 may be a stretch, aiming for 3,000 is worth considering.
The domestic stock market has already significantly reflected expectations regarding the new government's launch. The KOSPI index has recently recovered above the 2,700 level, recording the highest point since the 'Black Monday' global stock market crash in August of last year. While the calming effects of the United States' aggressive tariff policy have played a role, analysts have also stated that expectations surrounding the new government have propelled the stock market higher. Kim Jae-seung, an analyst at Hyundai Motor Securities, noted, 'Given the extremely sluggish state of our domestic market, strong domestic stimulus measures are needed from the new government,' projecting that the KOSPI index could rise to 2,890 points this year.
Looking at the nine elections held since 1981, generally, the KOSPI index has risen during the year following the presidential election. Experts believe that the trend of increased government expenditure after the inauguration of the new government has had a positive impact on stock prices.
This elected individual stated during his campaign, 'Whenever a democratic regime has been established, stock prices have always risen.' Statistically, this is not necessarily incorrect. Analyzing the stock price increase a year after the presidential election, the KOSPI index dropped during Lee Myung-bak's, Park Geun-hye's, and Yoon Suk-yeol's administrations. During the Lee Myung-bak administration, the global financial crisis hit the worldwide stock market, and during the Park Geun-hye administration, the aftermath of the European debt crisis affected the market. Conversely, during the year following the establishment of the democratic governments under Kim Dae-jung, Roh Moo-hyun, and Moon Jae-in, the KOSPI index rose.
The phenomenon of higher stock price growth rates when the Democratic Party, which emphasizes distribution over growth, is in power compared to when the Republican Party is in power is also observed in the United States. Many researchers interpret that the Democratic Party's policies, which prefer active expansion of government expenditure over the Republican policies aimed at improving the corporate environment through tax cuts and deregulation, tend to have a more positive impact on the stock market.
Given that this elected individual is advocating for a 'basic society' that would involve expenditures in the trillions of won for establishing income assurance systems across different life stages, it is expected that government expenditure will significantly increase. This suggests that the expansion of the government's fiscal expenditure is likely to have a positive impact on stock prices. A representative from an asset management company stated, 'Strong quantitative easing policies are expected under the new government,' adding, 'If large amounts of money enter the market in any form, traditional investment assets like the stock market will inevitably rise. The KOSPI index will also climb.'
The fact that this elected individual and the ruling Democratic Party have targeted the factors that have caused the chronic undervaluation of our stock market and are announcing rigorous policies to resolve them is also a reason for expecting immediate gains in the stock market.
This elected individual stated during his candidacy on his Facebook, 'I will open the era of the KOSPI index at 5,000,' and asserted, 'I will re-pursue amendments to the Commercial Act to protect shareholder interests.' The proposed amendments include mandating the cancellation of treasury shares by listed companies, expanding the separate election of audit committee members, and activating the cumulative voting system allowing the election of directors representing minority shareholders.
Measures are also being pursued to induce listed companies to make decisions that prioritize the interests of ordinary shareholders over those of the owner family, which would lead to a rise in stock prices. A representative scene indicating this policy direction was the extensive pressure placed on Hanwha Aerospace when it decided to raise funds through a rights issue. This elected individual and the Democratic Party criticized Hanwha Aerospace's decision as being not just a means of raising capital, but rather a subterfuge for succession of management rights. Ultimately, Hanwha Aerospace reduced the scale of its rights issue, and afterward, the stock price increased further.
In addition, the Democratic Party is preparing legislation to rectify the practice of major shareholders artificially maintaining low stock prices to reduce the burden of inheritance and gift taxes when succeeding management rights. The legislation includes taxing listed stocks with a price-to-book ratio (PBR) of less than 0.8, and the Democratic Party expects that the implementation of this law will lead to an increase in the stock prices of domestic listed companies and elevate the PBR.
The previously anticipated separation of taxation on dividend income has become more uncertain. This is because related content was excluded from this elected individual's pledge book. However, since the elected individual has shown a positive response to the proposed amendments to the income tax law focusing on the separation of taxation on dividend income, related tax reform should continue to be monitored.
Meanwhile, it remains to be seen whether the stock market will trend upward in the long term under Lee Jae-myung's government. Economic policies do not necessarily achieve their intended goals, and the impact of policies on our economy and stock market does not always align with intentions.
Experts advise that, in the long run, the direction of the stock index is ultimately determined by the strength of listed companies. If business activities are overly restricted, leading to a disregard for economic vitality, stock prices that briefly rise are bound to decline.
A representative from the business community pointed out, 'While stock prices may rise immediately through expansive fiscal measures that inject money into the market, if dependence on fiscal measures becomes excessively high, it can lead to a decline in market vitality and the side effects of hyperinflation and asset bubbles, as seen in countries like Venezuela.'