[Click eStock] "Lee Jaemyung Administration Launch: 35 Trillion Won Supplementary Budget to Raise Growth Rate by 0.3%p"

Hana Securities stated on June 4, "The Lee Jaemyung administration has announced a plan for a second supplementary budget exceeding 35 trillion won. If implemented, this could raise the economic growth rate by approximately 0.3 percentage points."

On this day, Kim Dooun, a researcher at Hana Securities, said, "The new administration is launching at a difficult time when the risk of Korea's economic growth falling to the 0% range is high due to a series of negative factors," making this analysis.

The Lee Jaemyung administration has identified 'growth' as its core objective, focusing on the intensive development of new industries such as artificial intelligence (AI), the establishment of growth foundations, and the promotion of a fair economy as major policy tasks. Kim noted, "While the fiscal multiplier may vary depending on the purpose of spending, if a supplementary budget exceeding 1% of GDP is realized, the growth rate is expected to increase by about 0.3 percentage points."

He added, "Going forward, the domestic bond market is expected to see a widening spread between short- and long-term interest rates, reflecting the supply burden from the second supplementary budget and next year's budget proposal, both of which are expansionary fiscal policies. Therefore, we recommend a primary strategy of phased buying focused on short-term bonds in the event of a rate rebound."

He also cautioned that increased volatility in the third quarter should be taken into account. The second supplementary budget is expected next month, and next year's budget proposal is anticipated in August. This period also coincides with the expiration of mutual tariff suspensions and the end of the US-China trade negotiation moratorium.

Kim explained, "Whenever the spread between the 3-year and 10-year government bonds exceeds 50 basis points (1bp = 0.01 percentage points), we also recommend phased buying of long-term bonds. From April to November next year, the inflow of passive funds from the WGBI (World Government Bond Index) is expected to exceed the estimated net increase in long-term bond supply, and structural demand for ultra-long-term bonds from insurance companies will inevitably continue."

He concluded that the Lee Jaemyung administration's financial policies are ultimately expected to have a positive impact on the stock market. Kim said, "Shareholder-friendly policy direction and favorable domestic and international macroeconomic variables are positive factors for the stock index. The tariff-related uncertainties stemming from Trump have peaked, and fears of a recession have eased. Dollar weakness, interest rate cuts, supplementary budgets, and other liquidity expansion and fiscal policies are all drivers of stock price increases."

He further added, "Policy measures will selectively benefit certain sectors. With the revision of the Commercial Act, sectors with low price-to-book ratios (PBR), as well as holding companies and financial sectors expected to engage in share buybacks, are anticipated to rebound. The planned introduction of regional currency, which is expected to be implemented first, is likely to stimulate domestic demand. Sectors closely linked to consumer sentiment, such as retail (distribution), hotels (leisure), software, and construction, are drawing attention."