"Policy Momentum Expected to Lead to Additional Stock Market Rally"

On June 20, expectations emerged that the policy momentum of the Lee Jaemyung administration is highly likely to lead to an additional rally in the domestic stock market.

The government has finalized a second supplementary budget of 30.5 trillion won. Of this, 20.2 trillion won has been allocated to increased spending aimed at boosting the economy and stabilizing people's livelihoods, while the remaining 10.3 trillion won has been earmarked for revenue adjustments. Considering that the first supplementary budget amounted to 13.8 trillion won, the total supplementary budget implemented is about 34 trillion won.

Park Sanghyun, a researcher at iM Securities, stated, "With the new administration implementing a large-scale supplementary budget, domestic growth momentum is expected to strengthen in the second half of the year. As a result, this year's GDP growth rate is likely to exceed the Bank of Korea's revised growth forecast of 0.8% released in May." He added, "Taking into account the effects of the 13.2 trillion won 'Livelihood Recovery Consumption Coupon' and the recent improvement in consumer sentiment driven by rising stock prices, we forecast this year's growth rate to reach around 1%."

He continued, "Of course, there are potential risks such as tariff negotiations and geopolitical risks stemming from the Middle East. However, if the tariff negotiations with the United States are concluded in July and the trade conflict between Israel and Iran does not escalate or become prolonged, there is a possibility that the effects of the supplementary budget will be amplified. If the large-scale supplementary budget serves as a catalyst for the recent sharp rise in the domestic stock market, there is a possibility that domestic economic momentum in the second half of the year could be stronger than expected."

Park also noted, "It is noteworthy that although the domestic stock market saw a significant rally in June, it has only recovered to early 2022 levels, unlike the major stock markets of other countries. If tariff and Middle East geopolitical risks ease, there is a high likelihood that domestic policy momentum will lead to an additional rally in the domestic stock market."