[Letter to the editor]Market likes Lee
South Korean stocks have gathered momentum since Lee Myung-bak, a former corporate CEO who has pledged to create a business-friendly government, took the oath of office as the country’s president on Feb. 25.
The Korea Composite Stock Price Index has hovered over the 1,700 level since Monday’s inauguration of the first conservative president in a decade. Two days after the inauguration ceremony, particularly, Seoul shares finished nearly 1 percent higher at 1,720.89, hitting a five-week high.
In fact, such a winning mood on Lee’s inauguration day bucks the past trend that the Kospi plummets on the day a new president takes office.
The inauguration of former President Roh Moo-hyun sent the Kospi nearly 4 percent lower, while Seoul shares sharply dropped 3.9 percent, closing at 516.38 on the inauguration of his predecessor, Kim Dae-jung. Before him, Kim Young-sam also saw the Kospi shed 2.56 percent in 1993 when he officially became president. The South Korean stock markets were closed on the day Roh Tae-woo was sworn in as the South Korean president in 1988. A day after his inauguration, however, Seoul stocks plunged more than 3 percent.
These slumps were retreats on profit-taking after presidential election-triggered rallies in the Korean markets in earlier days, many analysts said.
The inauguration of Lee sent the Kospi into positive territory on the strong belief that the former Hyundai Construction executive will revive the Korean economy as he has pledged in his presidential campaign.
Lee, nicknamed “The Bulldozer,” has vowed to boost economic growth, create more jobs, deregulate and attract foreign direct investment. Based on his campaign pledges, his main policy priority seems to be to enhance the country’s economy, and he has also shown keen interest in wooing foreign capital. In his nationally televised inauguration speech, Lee has emphasized pragmatism and promised to launch the country into the world’s top league.
“The MB [Myung-bak] government is projected to have a positive effect on the domestic stock markets by implementing market-friendly economic policies,” according to a report by Korea Investment Securities Company.
Earlier this year, Goldman Sachs Group also increased its economic growth forecast for South Korea in 2008 to 5.1 percent from 4.8 percent previously on expectations that investments will gain ground under the leadership of President Lee who favors deregulation, markets and growth.
“The MB government will help cushion the slump in the Korean economy faced with external headwinds such as the United States slowdown, rising import prices and unstable global financial markets,” Goldman Sachs said.
However, some market experts said there is no connection between the inauguration of a new president and stock prices.
“It is hard to say that the launch of the MB government has taken on a leadership role in pushing Seoul shares to break through the 1,700 level,” said Lee Jong-woo, a head researcher at Kyobo Securities.
But three days after Lee was inaugurated, the Kospi climbed nearly 1 percent higher Thursday, continuing its winning streak for four consecutive days.
Joan Cho, English editor,
INTERCOM Convention Services, Seoul, Korea