A president for investors

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A president for investors

 
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Lee Hyun-sang
The author is a columnist for the JoongAng Ilbo.

A market-focused YouTube channel came into the spotlight for in-depth questioning of presidential candidates Lee Jae-myung and Yoon Suk-yeol on their economic platforms. Followers of ruling Democratic Party (DP) candidate Lee were euphoric as it appeared Lee was the victory. Viewership on a talk show with Lee was 1.5 times more than that of Yoon.

The contest was in Yoon’s disfavor. Yoon has admitted he knows little about investment as he has merely saved up his earnings. He has registered his and his family assets at 7.1 billion won ($6 million), but assets under his name are only 240 million won in bank deposits. Lee is versed even in futures and options.

Lee boasts that he could be the first president with stock investment experience. Experience can be the best teacher. But his investment experience could do more harm than good in state governance. He could brush aside opinions from government officials by claiming his personal experience. Given his push on local currency and disaster relief handouts, such a worry may not be an exaggeration. 
 
 
On a pro-government YouTube channel, December 25, ruling Democratic Party presidential candidate Lee Jae-myung speaks about economic policies he will carry out if elected. [SONG SEUNG-HWAN]

On a pro-government YouTube channel, December 25, ruling Democratic Party presidential candidate Lee Jae-myung speaks about economic policies he will carry out if elected. [SONG SEUNG-HWAN]

Lee believes the Kospi could easily soar to 5,000 (from the current 3,000) if the market becomes more transparent. He thinks Korean stocks are undervalued because of light punishment on manipulation and “tilted playing field,” a term often used by retail investors. Retail participation in the market has plummeted. But they have not have shunned the local market just for foul play and injustice.

Undervaluation of Korean stocks has been long-standing. The Korean market remains in the emerging category of the Morgan Stanley Capital International index (MSCI). Korea has been bidding for an upgrade to the developed category since 2008. MSCI has repeatedly denied the upgrade due to a lack of offshore market for Korean currency, discrimination towards foreign investments and regulation on short selling. Foreign investors have found the Korean capital market system and practices unappealing. Foul play may be carried out in the Korean markets, yet they are not the primary issue by the MSCI.

Policymaking in economic affairs cannot be easy because there is no clear-cut solution. If the Korean won trade becomes permissible in New York or Europe as demanded by the MSCI, the stock market may draw foreign capital. But in this case, foreign exchange management becomes difficult for Korea. For instance, the government cannot carry out timely smoothing operations in cases of sharp volatility. The move can be highly risky for Korea with a non-reserve currency. Economic perspectives on fractional issues instead of a bigger picture can be dangerous.

Lee proposes legitimization of virtual assets primarily based on real assets. A businessman with close relationship with the DP reportedly has delivered an outline on creating virtual assets of 1,000 trillion won based on real estate. The idea is to create a fund worth 250 trillion won from 5-million-won seed money from each individual to invest in urban projects. When the investment proceeds hit 1,000 trillion won, the profit is to be handed out to investors in digital tokens. The bizarre idea may sound appealing to young people, but such a pipe dream cannot — and should not — be a primary motivation to the young.

No presidential candidates in America promise to raise the stock benchmark index to some threshold. Bill Clinton who won the presidential election with the popular slogan “It’s the economy, stupid” moved to address the country’s notorious twin deficits in fiscal and trade accounts upon inauguration. He cut public employee payroll by 350,000. He hardly acted out as a populist. Under Clinton, the U.S. enjoyed an economic boom throughout the 1990s. The Dow Jones Index jumped 215 percent during his reign.

Lee is pitching slogans such as “For me” and “March forward in the right way.” The catchphrases best reflect his pragmatism. But the economy needs vitality in engines for sustainable growth. If Lee engages in what can be appealing than what is needed, he could turn out to be a president for investors — not the economy.
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