Korean Presidential Candidates' Stock Market Pledges Exposed by Foreign Investor Sell-Off

South Korea's presidential hopefuls, Lee Jae-myung and Kim Moon-soo, have made competing promises to bolster the nation's stock market and attract foreign investors, but their plans are being tested in the face of a significant sell-off by non-Korean investors. Foreign investors have offloaded over 40 trillion won ($30 billion) worth of Korean stocks in the past nine months, prompting concern about the impact of U.S.-driven tariffs on the market. Analysts warn that only long-term structural reform can prevent the presidential candidates' promises from becoming empty slogans.

Key Takeaways:

• Lee Jae-myung of the Democratic Party of Korea has made capital market reform a key part of his campaign, pledging to revise the Commercial Act to strengthen shareholder rights and address governance issues, including eliminating abusive practices by controlling shareholders and improving dividend payouts.
• Lee's proposals include increasing the KOSPI index to 5,000 points within five years by improving corporate governance and shareholder value.
• Kim Moon-soo of the ruling People Power Party has proposed expanding tax breaks for long-term stockholders and fund investors, separate taxation of dividend income, and increasing annual contributions and tax-free limits for Individual Savings Accounts.
• Lee's aggressive approach to structural reform has earned him the support of 17 labor unions representing Korea's securities sector, while some in the business community view Kim's proposals as more stable and predictable.
• Analysts caution that campaign pledges alone are unlikely to lift the market out of its long-running stagnation, and that the next administration must treat capital market development as a core economic policy and tackle it with a long-term vision.

Statistics:

• Non-Korean investors sold a net 13.6 trillion won in Seoul stocks in April, the largest monthly sell-off on record.
• Cumulative outflows by non-Korean investors surpassed 40.08 trillion won over the past nine months.
• Market capitalization of listed firms in Korea has remained range-bound for years, failing to reach the KOSPI 3000 or KOSPI 5000 targets repeatedly promised by politicians.
• Kim's proposals aim to increase annual contributions to Individual Savings Accounts to 40 million won and tax-free limits to 10 million won.

Sources:

• Financial Supervisory Service
• Lee Jae-myung's policy platform
• Kim Moon-soo's policy platform
• A securities industry source who requested anonymity
• Seo Ji-yong, a business professor at Sangmyung University
• Business federation officials
• Labor unions representing Korea's securities sector.