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(News Focus) Moon's presidency spurs Seoul stock market

2017/06/08 15:32

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By Park Sang-soo

SEOUL, June 8 (Yonhap) -- Since the historic presidential election in early May, South Korea's stock market has rallied despite rising tensions stemming from North Korea's series of missile launches and still-lukewarm economic conditions, getting a boost from a much-expected corporate reform drive, a massive economic stimulus measure and sound corporate earnings.

Since Moon took office on May 10, the country's benchmark stock index, the KOSPI, has gained 2.94 percent as of Wednesday, marking the first time that the country's stock market eked out a gain during the one-month period after a new president is sworn into office.

On May 8, the last day of campaigning, the KOSPI closed at 2,292.76 points, but swelled to 2,360.14 points two days later on Wednesday, with market capitalization rising 41 trillion won (US$36.4 billion) to 1,528 trillion won over the cited period. People went to the polls the day before, which was a temporary holiday.

The stock index then soared to an all-time high of 2,371.72 points on June 2.

Analysts say better-than-expected corporate earnings in the country's key segments such as IT and petrochemicals in the early months of the year, along with expectations that North Korea-triggered geopolitical tension may smooth itself out down the road, are fueling the purchasing of local stocks by foreign investors in particular.

Also, economic tension with China is showing signs of easing, as Moon has indicated that the deployment of an advanced U.S. missile defense system, dubbed THAAD, will be resolved in a way that helps restore economic ties with the neighboring country.

Adding to this is Moon's firm pledge to reform the country's family-run conglomerates as their cobweb-like ownership structure and questionable business practices that have been under public criticism.

"Actually, Moon's policies chime well with foreign investors' desires," said Lee Chang-mok, an analyst at NH Investment & Securities. "Also, a recovery in the world economy and corporate earnings are positive to the local stock market."

   Analysts said the country's exports have risen for five consecutive months, stoking expectations that Asia's fourth-largest economy is set to see its recovery accelerate down the road.

"Most of all, economic fundamentals are improving, and a set of fiscal stimuli to be ironed out is boosting market sentiment," said Cho Yong-joon, an analyst at Hana Investment & Securities.

Foreign investors have scooped up 3.3 trillion won worth of local stocks since April, with the stock turnover jumping 30 percent to 6.22 trillion won over the cited period.

Actually, a package of risks such as the monthslong leadership vacuum caused by the ouster of Park Geun-hye over corruption charges and threats from North Korea and China have prevented the country's stock market from breaking out of so-called "boxed-in" trading, but investors now bet that the country's equity market has room for further gains.

"The country's stock market has been discounted due to North Korea's threat and murky corporate governance structure in the past, but is set to take a leap forward," said Bae Sung-young, an analyst at KB Securities.

Cape Investment & Securities said earlier the country's key stock index may flirt with the landmark 3,000-point level during Moon's presidency.

But there are till some lingering risks such as the Trump administration's trade protectionist stance and North Korea's continued provocations for the local stock market to face down the road.

China's extended boycott of South Korean goods and tourism, U.S. President Donald Trump's threat to scrap a free-trade agreement, and political instability at home may sour investment sentiment, analysts warned.

sam@yna.co.kr

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