Election Acts as a Catalyst for Construction Stock Surge
Both Candidates Focus on Real Estate Pledges
[Asia Economy Reporter Gong Byung-sun] Construction-related stocks showed strength ahead of the Seoul mayoral by-election. The real estate pledges of each candidate appear to have acted as a catalyst for the rise in construction stocks.
According to the Korea Exchange on the 30th, GS Construction recorded 44,250 KRW, up 1.84% (800 KRW) from the previous trading day on the 29th. This is an 8.46% increase compared to the market price on the 23rd, when the opposition parties unified their election camp. Daewoo Construction rose 6.11%, and Hyundai Construction increased 2.68%. SAMPYO Cement, a cement manufacturer, surged 21.43%. However, on that day, it showed weakness in the early session due to fatigue from the previous rise.
The sector as a whole significantly outperformed the market returns. The KRX Construction Index, composed of 28 construction-related stocks from KOSPI and KOSDAQ, rose 3.89% during the same period. In contrast, KOSPI increased by 0.02%, and KOSDAQ fell by 0.13% during the same period.
The strength of construction-related stocks is due to the Seoul mayoral by-election candidates focusing their pledges on real estate. Since the current government has faced unfavorable public sentiment regarding real estate, it has become a key election issue.
Park Young-sun, the Democratic Party candidate, stated that she would supply a total of 300,000 housing units without insisting on a public-led format, even if it goes against the current government's policy direction. Her pledges also include easing redevelopment regulations in low-rise residential areas, relaxing reconstruction regulations for aging apartments, and lifting height restrictions along the Han River. However, she opposes unconditional easing of redevelopment and reconstruction standards.
Oh Se-hoon, the People Power Party candidate, is even more proactive in deregulation than Park. Oh pledged to supply a total of 360,000 housing units and to re-designate 20,000 units annually through easing redevelopment and reconstruction regulations. He promised to relax floor area ratio and height restrictions and abolish the regulation limiting buildings to seven floors or less in the second general residential zone. Above all, he argues that the private sector, not the public sector, should be the core supplier.
Park Hyung-ryeol, a researcher at Meritz Securities, said, "Construction stocks were undervalued compared to company size and performance due to a lack of growth expectations, but this election acted as a catalyst." He added, "However, the pledges need to be implemented to become a greater growth momentum."
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