[비즈한국] As the 21st Presidential Election on June 3 approaches, the domestic financial market has entered the presidential election influence zone in earnest. In particular, expectations that the political uncertainty that has weighed on the domestic stock market will be resolved are growing, shifting investors' attention toward the policy direction of the new administration.
Generally, a "honeymoon rally"—a period of rising stock prices—often occurs immediately after a new government takes office following a presidential election, as a friendly atmosphere is formed due to policy announcements and expectations for economic stimulus. Kim Byeong-yeon, a researcher at NH Investment & Securities, forecasted, "The presidential election scheduled for June 3 will act as a major event that boosts internal policy expectations in the Korean financial market, which is usually more sensitive to global variables."
In this presidential election, a supplementary budget (extra budget) is emerging as one of the key variables. Currently, presidential candidates are mentioning the possibility of an extra budget through various channels, and even looking at past cases, most governments since the 2000s have carried out extra budgets immediately after taking office to stimulate the economy. The reason why past governments saw high stock price growth rates at the beginning of their terms is related to this increase in government spending.
Although a first supplementary budget of 13.8 trillion won was executed this year, it was an essential budget limited to urgent issues such as wildfire recovery and public livelihood support; therefore, it is predicted that the new government that will take office after the June election is highly likely to implement additional fiscal policies.
Cho Sang-hoon, a research fellow at Shinhan Securities, said, "Immediately after the five presidential elections held since 2000, consumer sentiment improved by an average of 3%p, and if fiscal policy is added to this, it would be the icing on the cake," adding, "The effect of improving economic growth through supplementary budgets ranges from a minimum of 0.1%p to a maximum of 0.8%p, and GDP growth rates mostly improved in the year following the compilation of an extra budget." Researcher Kim Byeong-yeon also predicted, "A 30 trillion won supplementary budget in 2025 would have the effect of boosting South Korea's economic growth rate by about 0.3%p."
Industries expected to benefit from policies include domestic demand stocks such as retail and the construction sector. In particular, construction investment tends to increase in the first year of a government's term. The construction industry has a greater ripple effect than manufacturing and is a field where the government's economic stimulus packages are concentrated.
Researcher Kim Byeong-yeon forecasted, "Korea is highly likely to highlight domestic-demand-centered growth industries amid the new government's domestic stimulus policies and expectations for the recovery of trust in the capital market," adding, "For the second-half strategy, it will be effective to move away from the shipbuilding and defense-centered strategy of the first half and adopt a 'Double Edge' strategy that includes both high-PER artificial intelligence (AI) growth stocks and low-PBR value stocks."
Kang Hyun-ki, a researcher at DB Securities, said, "Although construction and retail industries are less attractive as long-term investment targets, if we limit our view to the second half of this year, a certain level of stock price rebound could occur."
Expectations for the retail industry are also growing as a recovery in the Consumer Sentiment Index is anticipated. Although the index plummeted due to the prolonged impeachment situation, it has been showing a gradual upward trend since the early presidential election. Research fellow Cho Sang-hoon said, "Driven by the government's strong will to boost domestic demand, the retail industry has always stood out in the market during past presidential elections and supplementary budget phases," adding, "While the retail industry showed weakness during the 17th presidential election due to the global financial crisis and various regulations, it outperformed the KOSPI during the 18th to 20th presidential elections."
With export stocks relatively disadvantaged due to tariff risks, some analyze that domestic demand stocks, which are favorable in a strong won and interest rate cut environment, have additional room for growth. Kim Gyeong-tae, a researcher at Sangsangin Securities, said, "There is sufficient momentum for further gains even at current stock price levels."