Transformative Shift in Korean Politics

Korea has a new president. Yoon Seok-youl won a close and hard-fought election to claim the five-year term. He is an outsider, with no real political or foreign policy experience. He is best known for being an aggressive prosecutor. It seems to be a trend that voters gravitate toward outsiders, hoping for real change. He takes over after five years of leftist president Moon, who oversaw a dramatic increase in government spending, tighter regulations, and higher government debt. Moon also pivoted foreign policy towards China and wanted closer ties to North Korea. Yoon ran on a platform of shifting the country back towards the US in foreign policy and taking a more aggressive approach to North Korea. Economically he is in favor of reducing regulation and encouraging private investment, especially in real estate. While government spending will go up in 2022 as he has pledged to help small businesses deal with covid-related losses, Yoon has called for capping the fiscal deficit at 3% and government debt at 60% of GDP by 2025. We believe his election will be a positive catalyst for the market. With the election out of the way, DRAM prices bottoming out, and investment and consumer demand likely to pick up, we believe Korean equities should outperform in 2022.