Kospi hits 10-month high on hopes for Lee's economic revival

Korea Herald

2 days ago

Foreign inflows, stimulus plans drive 10-month high as new president takes office
South Korea's stock market climbed to a 10-month high on optimism that newly inaugurated President Lee Jae-myung will act swiftly to revive the country's sluggish economy through aggressive stimulus and market reforms.
The benchmark Kospi breached the 2,800 mark on Thursday for the first time since July 2024, extending gains from the previous session. The index jumped more than 2 percent in early trading to an intraday high of 2,831.11 before paring gains to hover near 2,800 as of 2:30 p.m.
The rally followed Wednesday's nearly 3 percent surge, which pushed the index to a year-to-date high of 2,770.84. Foreign investors net bought 1 trillion won ($735.4 million) and institutions added 200 billion won, while individuals sold 1.2 trillion won to lock in profits.
The buying continued Thursday, with foreigners and institutions snapping up another 670 billion won and 400 billion won, respectively, as retail investors offloaded 1 trillion won more.
Markets are responding to Lee's full-throttle policy agenda centered on restoring livelihoods and reigniting growth. 'We will begin by restoring livelihoods and revitalizing the economy,' Lee said Wednesday, launching an emergency economic task force as his first executive order.
Among his initial directives was finalizing a supplementary budget. Lee pledged at least 30 trillion won in fresh stimulus to be drafted, following the 13.8 trillion won package approved ahead of the election. Political and market observers expect the proposal to be submitted to parliament next month, with the funds largely targeting public support measures such as local business vouchers to revive domestic demand.
Beyond the extra budget, Lee's broader economic strategy hinges on expansive fiscal spending, with 210 trillion won in government funds planned over his five-year term. His agenda includes expanded welfare, support for strategic sectors such as artificial intelligence and efforts to lift long-term growth.
Lee aims to lift Korea's annual growth rate to 3 percent, up from the sub-1 percent pace forecast for this year. He also envisions transforming the country into the world's third-largest AI powerhouse and elevating it to the rank of the world's fifth-strongest nation during his presidency.
Investor sentiment is also buoyed by Lee's push to strengthen capital markets.
On Thursday, the ruling Democratic Party of Korea reintroduced a revised Commercial Act aimed at reinforcing minority shareholder rights — legislation previously shelved under the former administration and now central to Lee's pro-market agenda.
The bill proposes sweeping governance reforms, including expanding directors' fiduciary duties to shareholders, renaming outside directors as independent directors, mandating cumulative voting, expanding separate elections for audit committee members, introducing virtual shareholder meetings, and tightening the 3 percent rule that limits major shareholders' voting rights in audit board appointments.
To expedite implementation, all provisions will take immediate effect upon promulgation except for electronic voting, which will require system upgrades.
The local market is moving to shed the 'Korea Discount' as the new administration accelerates policy implementation, said senior market analyst Lee Kyoung-min of Daishin Securities.
'The push for Commercial Act revisions is fueling a revaluation of underperforming stocks, while expectations for a large-scale supplementary budget are bolstering hopes for a recovery in Korea's deeply frozen economy,' he said, noting that robust foreign inflows are driving the rally.
'Stronger policy expectations are putting upward pressure on the won, creating conditions for a potential pickup in foreign capital inflows,' he added.
The Korean won strengthened to an eight-month high against the greenback on Thursday, breaching the 1,350 won-per-dollar level for the first time since October 2024.