Korean stock market expected to gain momentum after presidential election

The KOSPI’s closing price is displayed at Hana Bank’s dealing room in Seoul, Monday, the day before the presidential election. Yonhap

Optimism is growing that the Korean stock market will gain upward momentum as political uncertainty eases following Tuesday's presidential election, according to securities analysts on Tuesday.

They said so-called honeymoon rallies have often followed past presidential elections, and similar expectations are emerging this time, with potential boosts from a supplementary budget and economic stimulus measures.

Some highlighted the food and beverage sector — which is projected to post stronger earnings — along with financial and brokerage stocks as areas worth watching.

Heo Jae-hwan, an analyst at Eugene Investment & Securities, cited statistics showing that in only one of the last three presidential elections did the stock market decline a month after the vote.

He noted that historically, market conditions following elections have generally been favorable.

"In the past nine presidential elections, the KOSPI rose by around 3 to 4 percent one month after the election and by 14 to 16 percent over the following year," Heo said. "Out of the nine cases, the KOSPI declined one month, three months and 12 months after the election in only three instances. This suggests that post-election periods tend to be marked by reduced market volatility and relatively strong performance."

Heo noted that the new administration is also expected to learn from past liberal governments' policy missteps, particularly the unintended consequences of real estate regulations.

Some securities firms predicted that the KOSPI could climb as high as the 3,000 mark in the second half of the year, citing expectations that the new administration will actively pursue a second supplementary budget, domestic demand-boosting measures and capital market revitalization policies.

Projections for the KOSPI's second-half trading range from 2,350 to 3,050 points.

"Expectations are growing for economic stimulus through both monetary and fiscal policies, such as an interest rate cut by the Bank of Korea and a post-election supplementary budget," said Lee Kyung-min, an analyst at Daishin Securities. "During the election process, hopes for capital market reform and an easing of the so-called Korea discount added further momentum to the market's upward trend."

Lee added, however, that amid ongoing uncertainties related to U.S. President Donald Trump's policies, fluctuations in the market driven by U.S. and Chinese economic data are inevitable.

Voters cast their ballots at a polling station installed at a day care center in Jeonju, North Jeolla Province, Tuesday. Yonhap

In terms of sectors, food and beverage stocks are considered key beneficiaries.

Following the three presidential elections since the 2010s, these stocks — including tobacco — experienced notable gains within one month: 8.39 percent in 2012, 7.55 percent in 2017 and 8.88 percent in 2022.

This surge is believed to stem from improved consumer confidence, fueled by expectations of favorable government policies after the elections, which in turn drove increased investment in the food and beverage sector.

"Immediate improvements in consumption patterns related to food and dining out are likely, as the growing emphasis on economic stimulus during the early election period has become increasingly important," said Lee Kyung-shin, an analyst at iM Securities.

Financial and securities stocks have also shown upward momentum in each of the last three elections, and during the latest election, expectations for better earnings and policy support further boosted their stock prices.

The clarity and implementation of the new government's economic policies will likely be crucial for driving additional gains.

"Bank stocks may undergo further revaluation as economic policy clarity improves postelection," explained Kim Jae-woo, a research analyst at Samsung Securities. "For securities stocks, sustaining the elevated trading volumes seen during the election period and enhanced policy visibility supporting business growth in corporate finance and mergers and acquisitions will be key factors."