The Korea Herald


Korean stocks seen extending rally after presidential election

By a2016032

Published : May 9, 2017 - 17:12

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If history is any guide, South Korea's stock market is likely to extend its rally after voters cast their ballots to choose the country's next president.

Based on market data on the bourse's performance during the first year of office of the last six presidents, market watchers expect solid gains for the benchmark Korea Composite Stock Price Index going forward.

On average local stock prices gained 23.18 percent after a new chief executive was sworn into office, although in some instances the market did backtrack during the very first month of a presidency.

The South Korean stock market, which was closed for Tuesday's presidential election, extended a rally for the second straight trading session Monday. The market surged 2.3 percent during the trading session to close at a record high of 2,292.76 points, thanks mainly to net foreign buying of shares.

Stock prices moved upwards amid hopes of likely economic stimulus after the presidential election.

Risk appetite grew as political uncertainties eased amid healthier corporate earnings and a modest recovery in the global economy, analysts said.

Some analysts said the Korean stock market has more room to gain ground.

Lee Jong-woo, head of research at IBK Investment & Securities, said there is an upward momentum for the Kospi as the recent rally is supported by a recovery in the global economy.

Lee expected that the rally may continue in the coming months because corporate earnings have not reached their peak.

Meanwhile, a South Korean financial body said the South Korean stock market could face greater levels of volatility in the second half due to external risks.

The Korea Center for International Finance said investors should be wary of any changes in foreign investors' sentiment, citing such risks as North Korea's nuclear program and policy uncertainty of a new South Korean leader.

The center -- which is designed to closely monitor movements in international financial markets -- also said global stock markets could face corrections in the second half, citing slowing growth in major countries and a possible rate hike in the US.

In March, the US Federal Reserve raised its key rate by a quarter of a percentage point to a target range of 0.75 to 1 percent. It also signaled that additional hikes would be made in a gradual manner later this year. (Yonhap)