Last week (June 2-5), domestic stock markets showed a wait-and-see trend ahead of the presidential election on the 3rd but regained investor sentiment with the resolution of political uncertainty. During the 3 trading days excluding holidays, the KOSPI index rose by 114.38 points (4.24%).
The promise from President Lee Jae-myung to "open the era of KOSPI 5000" sparked expectations, leading funds to flow into stocks expected to benefit from policy. The securities sector, artificial intelligence (AI) related industries, and holding companies recorded a notable uptrend, hitting their highest prices in a year.
On the 5th, the KOSPI index breached the 2800 level during trading for the first time in about 10 months, closing at 2812.05. Foreign investors bought a net 916.2 billion won, driving the stock market. Foreign investors had also purchased a net 1.5 trillion won on the 4th.
The exchange rate of the Korean won against the U.S. dollar also dropped to the 1350 won range, marking a 7-month low. Analysts suggest that the dollar's weakness due to poor U.S. employment and services indicators, along with expectations surrounding the new government's launch, contributed to the strengthening of the won.
In the securities industry, forecasts indicate that the "honeymoon rally" observed after the launch of the Lee Jae-myung government will continue this week. Given that the stock market has shown an upward trend after past elections, there is a strong possibility that a positive trajectory will be sustained this time as well.
Huh Jae-hwan, a researcher at Eugene Securities, stated, "(Looking at past cases) the market sentiment after elections has not been bad," adding, "In the last 9 cases, the stock price rose by 3-4% a month after the election, and by 14-16% a year later."
The ruling party's strong push for capital market friendly policies is also raising market participants' expectations. On the 5th of this month, the Democratic Party of Korea's task force for revitalizing the Korean stock market announced that it will reintroduce amendments to the Commercial Act, which include ▲ the fiduciary duty of directors to shareholders ▲ strengthening the cumulative voting system for large listed companies.
There are also expectations that the new government will actively pursue fiscal policies to boost domestic consumption. President Lee is reported to prepare a supplementary budget of at least 35 trillion won.
However, there are concerns that expectations for market stimulation may have already been factored in, indicating caution for short-term investments. There could be significant profit-taking movements.
Lee Seong-hun, a researcher at Kiwoom Securities, noted, "With the inauguration of the president, the political landscape has shifted to a divided government, enabling faster policy implementation" and added, "Considering this, the themes benefiting from low price-to-book ratios (PBR) in holding companies, securities, and banks may see profit-taking in the short term due to recent steep rises."
The tariff issue from the U.S. is still a current concern. The U.S. is hastily negotiating tariffs with various countries ahead of the July 9 grace period. The Trump administration stated that it has sent letters to all countries currently negotiating trade agreements with the U.S., demanding they submit their "best offers" by the 4th.
The U.S. and China will hold their second high-level trade talks on the 9th (local time) in London, England. This meeting is expected to focus on proposals for resuming U.S.-China trade negotiations, including rare earth export controls. President Trump indicated via social media that "the talks will go very well," leading to speculations that tariff concerns may ease depending on the meeting's outcome.
Kang Jin-hyuk, a researcher at Shinhan Investment Corp., emphasized the need for confirmation of easing trade tensions, stating that "we need to see if any additional materials regarding U.S.-China trade negotiations will emerge" and added, "It seems that Korea will also enter into formal tariff negotiations with the U.S. following the inauguration of the new government."
Experts say that attention should be paid to the U.S. employment report being released on the 6th, which is a holiday in the Korean stock market. If signs of a slowdown emerge in employment indicators, the market may anticipate a shift in the Federal Reserve's (Fed) interest rate reduction policy.
This week, the U.S. consumer price index (CPI) and producer price index (PPI) for May will also be released. Analysts in the securities market expect the May CPI to rebound by 2.5% year-on-year after four months. There are also projections of a slight rise in the PPI. Lee Kyung-min from Daishin Securities stated, "If the inflation rate is not significantly higher than the already factored concerns, the market shock will be limited."
On the 13th, a regular adjustment of Korea's two major benchmark stock indices, KOSPI 200 and KOSDAQ 150, is scheduled. The KOSPI 200 index is set to include 8 companies, including HD Hyundai Marine Solution, DN Automotive, and Korea District Heating Corporation. In contrast, LX International, COSMO AM&T, and PI Advanced Materials will be removed.