🚨 Lee Jae-myung Effect Boosts Stock Market: Korean Stocks Rise 30%, Foreign Investors Take Notice
Today Korean Economic News | 2025.07.06
📌 Political Stability and Shareholder-Friendly Policies Push KOSPI Close to 3000
💬 Korean stocks have surged 30% in the first half of 2025, creating what's called the 'Lee Jae-myung effect' after the president's election. The New York Times reported that "political stability and expectations for shareholder-friendly reforms are driving Korean stock markets higher." KOSPI has broken through 2,800 and is eyeing the 3,000 level, while foreign investor buying has increased significantly. Expectations for corporate governance improvements, increased dividends, and more share buybacks are leading the market rally. Digital asset deregulation and manufacturing competitiveness policies are also helping related stocks perform well.
1️⃣ Easy to Understand
Korean stock markets have risen 30% this year, making investors very excited. This is called the 'Lee Jae-myung effect' because hopes for the new government are pushing stock prices higher.
Let me explain why stock markets are rising like this. Stocks reflect what people expect companies to do in the future. When investors think "companies will do better in the future," more people want to buy stocks, which makes stock prices go up.
After President Lee Jae-myung was elected, investors are hoping for three main things. First, political stability. When politics are stable, companies can make long-term plans more easily and invest more money. Second, policies that give more benefits to shareholders. This includes increasing dividend payments and companies buying back their own shares to benefit investors. Third, developing new growth engines. Policies to grow future industries like digital assets and advanced manufacturing are pushing up related company stock prices.
'KOSPI' is Korea's main stock market index, which combines the stock prices of major companies into one number. When KOSPI goes up, it means stock prices are generally rising. Currently moving past 2,800 and looking toward 3,000 means it has risen to quite a high level.
Foreign investors are also buying lots of Korean stocks. This shows they have a positive view of Korea's economy and companies' future. When foreign money comes in, it provides more funds to the stock market and helps push prices higher.
However, stock investing always carries risks. Stock prices can go up or down, so you need to be careful when making investment decisions.
Whether this upward trend continues will depend on the actual effects of government policies and global economic conditions.
2️⃣ Economic Terms
📕 Shareholder-Friendly Policies
Shareholder-friendly policies mean companies prioritize the interests of their shareholders.
- Common methods include increasing dividends, share buybacks, and expanding shareholder returns.
- This also includes improving corporate governance to increase transparency and protect shareholder rights.
- These policies help investors earn more money when they invest in companies.
📕 KOSPI
KOSPI stands for Korea Composite Stock Price Index, Korea's main stock market indicator.
- It shows the combined price movements of major companies with large market values.
- It's calculated using January 4, 1980 as the base date (100).
- When KOSPI goes up, it means the overall stock market is doing well; when it goes down, it means the market is struggling.
📕 Foreign Net Buying
Foreign net buying is the amount foreign investors bought in Korean stocks minus what they sold.
- A positive number means foreigners bought more Korean stocks than they sold.
- When foreign net buying increases, money flows into the stock market and helps push prices up.
- This is an important indicator of foreign confidence in Korea's economy.
📕 Corporate Governance
Corporate governance is the system that shows how companies are run and controlled.
- This includes board composition, executive appointments, and decision-making processes.
- Transparent and fair governance increases investor trust, leading to higher company values.
- Key elements include protecting minority shareholders and responsible management.
3️⃣ Analysis and Economic Outlook
✅ Specific Factors Behind the 'Lee Jae-myung Effect'
Let's look closely at the political and policy factors driving Korea's stock market surge.
First, political stability is the key factor improving investor sentiment. President Lee Jae-myung's election has greatly reduced political uncertainty. In the past, during times of political chaos, investors tended to avoid risks and pull money out of stock markets, but now the opposite is happening. In a stable political environment, companies can make long-term investment plans more easily, and foreign investors are also increasing their trust in the Korean market. The announcement of large-scale investments by major companies also reflects expectations of political stability.
Second, expectations for shareholder-friendly policies are driving up stock valuations. The new government has made 'enhancing shareholder value' a core economic policy, encouraging companies to increase dividends and buy back shares. Major companies have already announced plans to raise dividend rates and buy back shares, increasing investors' expected returns. Institutional improvements for better corporate governance are also underway, with long-term company value increases expected. This raises the possibility of eliminating Korea's 'Korea discount' and attracts interest from overseas investors.
Third, digital innovation and manufacturing advancement policies are amplifying growth expectations. The government's digital asset deregulation policies have caused related company stocks to surge. Particularly, allowing won-based stablecoin issuance and improving digital asset exchange regulations are becoming new growth drivers for fintech companies. At the same time, focused investment plans for future growth industries like semiconductors, biotechnology, and clean energy are also driving up stock prices in those sectors.
The Lee Jae-myung effect reflects not just political benefits but expectations for structural reforms, with sustainability depending on policy execution.
✅ Background and Meaning of Increased Foreign Investment
Let's analyze why foreign investors are more interested in Korean stocks and the ripple effects.
First, expectations for improved fundamentals of Korean companies are driving foreign investment. Global investors are paying attention to the possibility of improved ROE (return on equity) and increased dividends from Korean companies. Particularly, the earnings recovery of semiconductor companies like Samsung Electronics and SK Hynix, and Hyundai Motor Group's electric vehicle business expansion are attracting foreign investment interest. Also, expectations that Korean companies' shareholder return rates will increase due to government shareholder-friendly policies are greatly influencing investment decisions.
Second, Korea's weight is increasing in Asian investment diversification strategies. As uncertainty about China's economy and concerns about Japan's low growth increase, foreign investors are increasing Korea's weight in their Asian investment portfolios. Korea is emerging as an alternative investment destination in Asia based on relatively stable political environment and solid economic fundamentals. Particularly, the concentration of globally competitive industries like semiconductors, IT, and biotechnology gives it high long-term investment appeal.
Third, won strength and expectations for interest rate cuts are improving foreign investment returns. As Korea's economic stability increases, the won is strengthening, allowing dollar-based foreign investors to expect currency gains as well. Also, as the possibility of interest rate cuts due to price stability increases, the relative attractiveness of stock investment is growing. This is accelerating the flow of foreign funds into Korea.
The surge in foreign investment is providing stable upward momentum along with enhancing Korea's global stock market status, which is a positive factor for long-term market development.
✅ Sustainability of Stock Market Rise and Risk Factors
Let's comprehensively evaluate the sustainability of the current stock market rise and risk factors to watch.
First, policy execution and actual results are key variables for continued growth. The current rise heavily depends on expectations for policies, so if actual policy effects don't appear, there could be corrections. Particularly important is whether corporate governance improvements and expanded shareholder returns lead to concrete results. The government needs to show visible results of major policies by the second half of 2025 to maintain investor trust. Also, whether major companies actually increase dividends and execute share buybacks is an element to watch closely.
Second, changes in the global economic environment could constrain the upward trend. Changes in US interest rate policy, China's economic slowdown, and geopolitical risks could negatively affect Korean stocks. Particularly, changes in global demand for the semiconductor industry or the speed of electric vehicle transition in the auto industry will directly affect major companies' performance. With foreign investment surging, if global risk-averse sentiment spreads, capital outflow possibilities cannot be ruled out.
Third, valuation burdens and overheating concerns need caution. After the 30% surge, some stocks' price-to-earnings ratios (PER) have become excessively high. Particularly for theme stocks or policy-related stocks, there are concerns about overvaluation compared to earnings. Investors need to take a comprehensive approach considering companies' actual value and long-term growth potential rather than focusing only on short-term profits. The government also needs appropriate monitoring and measures to prevent market overheating.
The sustainability of stock market rises depends on policy execution and the global environment, requiring investors to take a careful approach maintaining balance between expectations and reality.
4️⃣ Conclusion
The 30% surge in Korean stocks called the 'Lee Jae-myung effect' is a positive phenomenon created by expectations for political stability and shareholder-friendly policies. However, for this upward trend to continue, policy execution that turns expectations into actual results must support it.
The core drivers of the current stock market rise are three things: securing political stability, expectations for shareholder value enhancement policies, and vision for developing future growth engines. All these elements are being received as positive signals by investors, bringing domestic and foreign funds into Korean stocks.
Particularly, the increase in foreign investor net buying shows that global trust in Korea's economy and companies is rising. This is evaluated as a meaningful change beyond simple short-term gains - enhancing Korea's global stock market status.
However, there are points to be careful about. Since the current upward trend heavily depends on policy expectations, if actual results fall short of expectations, there could be corrections. Also, external factors like changes in the global economic environment or geopolitical risks could constrain the upward trend.
Investors should take advantage of the current positive flow while being cautious about excessive optimism. A careful investment approach based on companies' actual value and long-term growth potential is needed. Rather than focusing only on short-term profits, establishing sustainable investment strategies is important.
At the government level, showing substantial policy results that meet market expectations is important. Concrete execution of shareholder-friendly policies, visible results of corporate governance improvements, and creating new growth engines will be keys to maintaining investor trust.
Ultimately, whether the 'Lee Jae-myung effect' leads to structural improvements in Korea's economy rather than being a one-time phenomenon will determine the future direction of stocks. Making expectations reality is the challenge ahead.