South Korea: new president, new policies

Yoon Suk-yeol has been elected as as South Korea's next president, a move that could bring new economic policies and reinvigorate the country's stockmarket.

South Koreans have elected conservative Yoon Suk-yeol to be the country’s next president. The vote was the closest in Korean history, with Yoon beating rival Lee Jae-myung, the candidate of the governing centre-left Democratic party, by less than 1%. Yoon will take the reins of the world’s tenth-biggest economy from incumbent Moon Jae-in in May. 

The campaign saw “unprecedented levels of toxic rhetoric, mudslinging and lawsuits”, says the Associated Press. Moon’s two immediate predecessors have both been convicted on corruption charges, a sign of a deep-rooted rot in South Korean politics.

The economy finished 2021 “on a strong note, with GDP up 4.1% year-on-year in the fourth quarter”, says IHS Markit. Exports soared 26% to a record high of $645bn last year thanks to strong global demand for semiconductors, petrochemicals and cars. 

Yet ordinary voters are not feeling prosperous, says Steven Borowiec for Nikkei Asia. “The South Korean public is increasingly anxious over growing inequality, particularly in the form of housing prices, which skyrocketed under Moon.” Many younger voters backed Moon at the 2017 election, but the housing situation and youth unemployment prompted many of them, especially “angry young men”, to switch to Yoon this time, says Sotaro Suzuki, also in Nikkei Asia.

Balance of power

Yoon’s victory could “reshape the balance of power in East Asia”, says Phelim Kine for Politico. Previous Korean governments have tried to balance the US, the country’s key military ally, with China, its biggest trading partner. Yet “public antipathy toward China” is rising. Yoon is likely to align the country more closely with the “quad”, a “regional geostrategic grouping” of the US, Japan, India and Australia.

Meanwhile, the promise of new economic policies could bring renewed vigour to a stockmarket that is down 11% this year. Nuclear energy, tech and construction stocks bounced on Yoon’s victory. Yoon’s party “promotes market-led solutions and a relatively light role for the government” as well as “renewed support for nuclear energy”, says Scott Snyder at the Council on Foreign Relations.

South Korea is still classed as an emerging market by index provider MSCI, despite a GDP per capita similar to Italy’s, says Frances Yoon in The Wall Street Journal. Korean equities trade at a discount to those in comparable markets. An upgrade to developed status could bring $44bn in foreign investment, says Goldman Sachs. That will require the authorities to liberalise currency markets, which have remained tightly regulated since the 1997-1998 Asian financial crisis. If an upgrade comes, it will probably not happen until “2024 at the earliest”.

Recommended

Despite the crypto crash, bitcoin still has a bright future
Bitcoin & crypto

Despite the crypto crash, bitcoin still has a bright future

Cryptocurrencies have crashed hard, with bitcoin down by more than 50% from its peak. But, says Dominic Frisby, bitcoin still has a future – it is the…
19 May 2022
Do Kwon: the King of Crypto Lunatics
People

Do Kwon: the King of Crypto Lunatics

Cryptocurrency entrepreneur Do Kwon liked to ruffle feathers and stir things up in his industry. But the collapse of his empire has left investors des…
19 May 2022
Tech stock crash – dotcom bust 2.0 is upon us
Tech stocks

Tech stock crash – dotcom bust 2.0 is upon us

It’s carnage in the tech sector as the market crashes. But that spells opportunity for canny investors, says Matthew Lynn
19 May 2022
Three things you should learn from Bill Ackman's brilliant Netflix trade
Investment strategy

Three things you should learn from Bill Ackman's brilliant Netflix trade

Hedge fund guru Bill Ackman has lost $400m selling Netflix shares. John Stepek explains why this was a brilliant trade, and outlines three things that…
19 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022