S.Korean builders, tech stocks rally after election

The South Korean stock market rose across the board on Thursday, reacting positively to the election of former prosecutor generator Yoon Suk-yeol as the country's next president and tracking overnight gains on Wall Street.

Homebuilders, gaming companies, online platforms and financial services firms led the market higher on expectations of deregulation and investor-friendly policies.

Further, Yoon's campaign pledge to abolish capital gains taxes for individual stock investors lifted market sentiment, after hopes of a ceasefire in Ukraine drove down prices of crude oil and other key raw materials.

"The Yoon administration is expected to seek broad deregulation to
promote private sector activity," Goldman Sachs Managing Director Goohoon Kwon said in a note released on Thursday.

Shares in GS Engineering & Construction shot up 8.18% to finish at 46,300 won. The stock climbed to as high as 46,450 won at one point, its strongest intraday level in more than five months.

Hyundai Development Corp., another leading apartment builder, jumped 8.26% to end at 18,350 won.

Yoon from the main opposition People Power Party vowed to supply 2.5 million new homes during his five-year term. To do so, he plans to relax rules on reconstruction and redevelopment.

The main Kospi bourse closed up 2.21% at 2,680.32, reversing its three-day downturn.

PLATFORM COMPANIES, GAME DEVELOPERS

The country's two leading platforms Naver and Kakao rallied as Yoon is expected to abandon the current administration's heavy-handed policies.

Naver, South Korea's top online portal, spiked 8.54% to close at 330,500 won, with mobile giant Kakao up 8.58% to 100,000 won.

Gaming stocks rose in a positive response to the president-elect's promise to loosen the grip on cryptocurrencies, including allowing the issuance of digital coins and their initial public offerings, as game developers are shifting toward play-to-earn games. 

Krafton, the developer of the popular battle royale game PlayerUnknown’s Battlegrounds (PUBG), soared 7.86% to 295,000 won.

NCSoft rose 3% to end at 443,500 won, with Netmarble gaining 3.45% to 105,000 won.

Kangwon Land, a local casino operator, rose 5.31% to 26,750 won amid expectations of economic reopening.

HOLDING COMPANIES, FINANCIAL SERVICES FIRMS

Holding companies also advanced, welcoming Yoon's pledge to tighten rules on spin-offs and to offer the existing shareholders of a parent company new shares in a spun-off unit ahead of other shareholders.

Lotte Corp., the holding company of the country's retail giant Lotte Group, rallied 7.3% to close at 30,850 won. SK Square jumped 5.38% to 51,900 won.

Among banks and insurance companies, Hana Financial Group added 3.05% to 45,650 won and DB Insurance leapt 5.18% to end at 58,900 won.

Yoon, who earned a reputation as a hard-line prosecutor, vowed to strengthen rules on Big Tech platforms, including fintech operators, to level the playing field with established financial services firms. 

Among energy-related stocks, Kosdaq-listed Bosung Power Technology shined, jumping 15.93% to close at 6,840 won.

The parts maker is seen as a likely winner of the incoming government's plan to adopt smaller modular reactors to increase the country's dependence on nuclear power, in contrast with the Moon administration's nuclear phaseout plan.

BEAR MARKET RALLY?

However, stock market analysts cautioned against optimism over Yoon's campaign pledges, which may take a longer time to be fulfilled in the current parliament, dominated by the ruling Democratic Party.  

They said it might be premature to expect a full-fledged rebound in the domestic stock market due to ongoing uncertainties about the war in Ukraine, US monetary policies and global supply chain disruptions.

Those external factors will outweigh domestic political issues such as the new president and his election promises in the stock market over the long term, said Shinyoung Securities research head Kim Hak-gyun. 

"Until the 2024 general elections, the president-elect's policy options will be limited to energy, housing markets and foreign policies that can be implemented largely by executive orders," Goldman Sachs' Kwon added.

Write to Jae-Won Park and Jae-Yeon Ko at wonderful@hankyung.com
Yeonhee Kim edited this article.