South Korean shares rally on post-election policy hopes (updated)

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04/06/2025 02:15

Benchmark KOSPI rises 2.66% to 10-month high

New president vowed to pursue corporate reforms to boost market

Securities, financial sectors expected to gain most from reforms

Renewable energy stocks up on hopes of shift from nuclear policy

Adds analyst comments in paragraphs 4-5, details and updates prices after market close

By Jihoon Lee and Youn Ah Moon

SEOUL, June 4 (Reuters) - South Korean shares climbed on Wednesday to their highest levels in 10 months, as liberal presidential candidate Lee Jae-myung's election victory raised hopes of swift economic stimulus policies and market reforms.

The benchmark KOSPI .KS11 jumped 2.66% to 2,770.84, posting its biggest daily gain in nearly two months and closing at the highest level since August 1, 2024.

Lee officially took office as president on Wednesday, just hours after his victory in a snap election the previous day. His swift rise to power ends six months of political turmoil sparked by former President Yoon Suk Yeol's failed attempt to impose martial law in December - a move that stunned the country and rattled financial markets.

"The inauguration of the new administration resolved political uncertainty," said Kang Jin-hyeok, an analyst at Shinhan Securities.

"And, there are expectations that policy drives could be strong as Lee's Democratic Party holds a majority in parliament," Kang said.

Foreign investors snapped up local shares worth 1.05 trillion won ($766.60 million), marking their biggest single-day purchase since August 16, 2024.

Lee has pledged to bring corporate reform measures to boost the domestic stock market, raise investment in artificial intelligence, and revive an economy reeling from slowing growth with stimulus policies.

On capital markets, Lee has pledged to revive legislation within a few weeks to curb abuses by controlling shareholders of chaebol conglomerates, as part of his "KOSPI 5,000" pledge to double the value of the domestic stock market.

The revision to the Commercial Act is seen by market analysts as a fundamental change needed to resolve the so-called "Korea Discount", a tendency for local shares to be undervalued  compared with global peers due to low dividend payouts and opaque corporate governance.

The securities sector .KS53 was the top gainer, rising 8.1% to its highest level since August 2009, while financial groups .KS49 jumped 6.5% to the highest point since May 2008.

Analysts anticipate that these sectors will be among the biggest beneficiaries of ongoing market reform efforts.

"We expect to see meaningful progress in capital market and governance reform post-election," Morgan Stanley's analysts said in a note, setting their KOSPI target for June 2026 at 2,800 for the base case and 3,100 for the bullish case.

Renewable energy stocks rallied on expectations of a reversal in energy policy away from nuclear energy, with Hanwha Solutions 009830.KS climbing 5.7% and OCI 456040.KS gaining 4.9%, while the construction sector .KS44 rose nearly 3% on stimulus hopes.

With President Lee signaling a more conciliatory approach toward North Korea and China, stocks linked to North Korea, such as In The F 014990.KS and Namkwang Engineering & Construction 001260.KS, as well as China-exposed sectors like beauty and entertainment, saw gains.

Among major heavyweights, chipmaker SK Hynix 000660.KS gained 4.8%, while rival Samsung Electronics 005930.KS rose 1.8%, further buoyed by overnight gains among U.S. peers.

"A combination of aggressive industrial policies and expansionary fiscal policies could lead to faster economic growth, at least in the short term," said Kim Jin-wook, an economist at Citi.

Lee announced plans to draft a second supplementary government budget of at least 30 trillion won to support the trade-reliant economy, which has been hit by U.S. tariffs and is projected to grow by just 0.8% this year. This follows a 13.8 trillion won supplementary budget passed in May.

The won strengthened 0.55% to 1,369.5 per dollar on the onshore settlement platform KRW=KFTC.

The country's treasury bond yields rose, with the benchmark 10-year yield KR10YT=RR gaining 9.3 basis points to 2.894%, the biggest jump since January 13.

($1 = 1,369.6800 won)

 (Reporting by Jihoon Lee and Youn Ah Moon; Editing by Tom Hogue, Sonali Paul and Sherry Jacob-Phillips)

 ((jihoon.lee@thomsonreuters.com;))