June 11, 2025 • 25 mins
South Korea's June presidential election ended six months of political uncertainty and policy paralysis in the country. Investors are optimistic that President Lee Jae-myung, with the support of the legislative assembly, can boost the economy with fiscal stimulus and corporate governance reform. The Kospi Index has surged more than 20% this year, surprising many global investors who have until now been hesitant to allocate capital in the country.
President Lee faces many challenges, however, including the threat of US tariffs, increasing competition from Chinese exports and a sluggish economy. And what does a return to democratic party policies mean for the chaebols, the scions of Korean industry? Peter Kim, investment strategist and managing director for KB Securities, discusses the outlook for Asia's fourth-largest economy with John Lee and Katia Dmitrieva on the Asia Centric podcast.
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Speaker 1 (00:01):
E j m Jung where President Lee won South Korea's
presidential election last week, ending six months of uncertainty and
chaos following last year's martial law tobacco and the eventual
impeachment of former President Yunskul.
Speaker 2 (00:16):
Lee has promised a big stimulus package to boost the economy.
Investors like what they hear so far. The COSPY rose
near a bull market when the result was announced. The
index is up over seventeen percent vi SHE, making it
one of the best performing stock indices in the world.
Speaker 1 (00:33):
But President Lee faces a plethora of challenges, including the
threat of US tariffs on the country's highly export reliant economy,
a deeply divided electorate, and a rapidly aging population. Can
the new president revive Korea's economy and financial markets? And
what does this mean for its relationship with the US,
(00:54):
China and North Korea.
Speaker 2 (00:57):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong, and I'm.
Speaker 1 (01:02):
Katy Dmitrieva also here in Hong Kong.
Speaker 2 (01:05):
Today we have Peter Kim, Managing director and investment strategist
at KB Securities in Soul. Peter, Welcome to the show.
Speaker 3 (01:14):
Thank you.
Speaker 1 (01:14):
Thanks for joining us, especially so quickly after the results.
We're actually filming this or taping this the week prior
to when it will air, so I appreciate it.
Speaker 4 (01:25):
It's a very important time in Korea's development and history,
so hopefully we'll try to lay a better path and
better vision forward for creat a very critical time.
Speaker 1 (01:38):
I think, yeah, it's been a very rough few months.
I think we can say, how do you read the
election results?
Speaker 4 (01:48):
Six months of policy paralysis and the reason for that
paralysis being very brief but chocking martial law. I would
say that anything from now on has to be a
positive and I think the election result, the turnout was
almost at the historical high, which is meaningful, and also
(02:12):
the fact that we now have a government that is
empowered with the Legislative Assembly on its side. Hopefully that
will mean that there will be more proactive legislation being
passed and policies that will actually set a direction. So
I think you can see from the market reaction there's
(02:32):
a lot of hope that this will be a positive
turn and I think there are reasons to believe that
they could be very positive, especially because being a left
wing government now investors constantly look towards what we saw
during the last left wing government which is under President Moon,
and during that time, I think it's fair to say
(02:54):
a lot of investors thought it was very anti market,
anti business, and I think Presidentally, even though he's from
the same party, might surprise investors, was a very different version.
Speaker 1 (03:07):
So a bit less uncertainty, definitely.
Speaker 3 (03:11):
A lot less uncertainty.
Speaker 4 (03:12):
Hopefully that means positive surprises rather than negative surprises. Again,
like you know, if Ilways had a choice between a
paralysis but some big spag of progress versus some setbacks,
I would prefer action over a paralysis at a time
when you know, you get these external risks with karaphore
(03:34):
and geopolitical risk. I don't think any country can afford
to be in a leadership vacuum.
Speaker 5 (03:40):
Peter.
Speaker 2 (03:41):
Even before the martial law debacle and the eventual impeachment
of the previous president, Korea's economy was already slowing. It
was already, you know, quite weak. Do you think this
new president and his measures is enough to restart economic growth?
Speaker 3 (03:58):
Yeah?
Speaker 4 (03:58):
I mean it's important to understand that the marshal law
incident only in hands that we realized that we were
dealing with a very frustrated and very very much an
early stage of lame dub presidency, right, and that we
found out that the desperation that led to the marshal
law decision was that he was in a stonewalled in
(04:21):
every initiative that he took, and that he felt that
he didn't have the.
Speaker 3 (04:25):
Enough of a public backing and all that led to that.
Speaker 4 (04:28):
So I guess in handsight that slowing economy was part
of that.
Speaker 3 (04:33):
I think the new president.
Speaker 4 (04:37):
The first statement after the election result was that economic
growth was his top priority, and I think that really
reflects the general public perception that you know, as you
mentioned about birth rates, slowing, exports with the exporters being surpassed.
Speaker 3 (04:56):
By China, all of those factors.
Speaker 4 (05:00):
I think the Korean public is really cognizant of the
silent crisis that Korea faces. The Central Bank of Korea
just guide it for a zero point per cent GDPD share,
and I do believe I checked in it's it's probably
the first time outside of a crisis, an official crisis,
that we are going sub one percent. So I think
(05:24):
that is a pretty clear message that this government really
needs to photocite it's social agenda. Which it typically does
for the sake of growth at all costs.
Speaker 1 (05:34):
So how can the government actually engineer that kind of growth,
especially when we have a global trade war? And South
Korea is interesting because it's not just the bilateral trade, right,
it's sort of in the region globally kind of a
nuclear So a lot of goods passed through the country.
They import, export, hold in warehouses. You know, it's sort
(05:57):
of central in the supply chain. How could that kind
of growth be possible in that environment? Are there other
kind of levers or avenues for that growth?
Speaker 3 (06:07):
Yeah, I mean there's no magic here.
Speaker 4 (06:09):
I think amongst the top three policy agendas for both
sides during the election campaign was AI right people leaning
on AI to be the solution for the growth problems,
which I'm a little bit skeptical of, to be honest.
But how one can transform that technology into economic growth,
It's challenged that every country faces, so I'm not sure
(06:31):
whether we're alone in that part. Obviously, fiscal stimulus is
very typically left wing policy to lean into. I'm already
talking about stimulus package which were blocked just prior to
the martial art decision. Now they can have a free
runway to get that going. Probably that's an easy.
Speaker 3 (06:52):
Win over the longer term.
Speaker 4 (06:54):
I guess you know, right wing government last year initiated
that Value our program, which is to stimulate the capital markets,
try to get that capital flowing into the right companies.
That is, doing more for shareholder rights and rather than
just going for that export cycle driven growth, which is
what career historically depended on. Longer term, I continue to
(07:18):
look at how we can make labor productivity work. Now
that's the interesting part because President Moon, the last left
wing president, really went for the idea of job security
rather than job creation. So he did that you shrinking
(07:38):
of working hours, raising minimum wages, making labor market very rigid,
and that probably was a big part of current export
losing their competitiveness. Now, it would seem contradictory for the
same left wing party to promote labor flexibility, but that's
(07:59):
what I mean about procasing economic growth.
Speaker 5 (08:03):
Labor productivity, Labor market flexibility is extremely important part of
promoting growth and promoting export competitors, and I hope that's
what we're going to see in the coming twelve months.
Speaker 2 (08:17):
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(08:39):
If you like what you're hear, don't forget to subscribe
and share. So you're insinuating that the new government is
on the left, but you think it's going to be
much more pro business, much more practical than under the
previous left government.
Speaker 4 (08:54):
Moon, well, I think definitely relative to the Moon administration,
it will be more pro business simply because the times
have changed.
Speaker 3 (09:06):
During President Moon, he was empowered.
Speaker 4 (09:09):
From twenty seventeen to twenty and twenty one, right, and
that was when growth was pretty good. Our exports were
doing well. We didn't really have that plummeting birth rates.
Even though he was gradually declined, it didn't sort of
have that collapse that we saw in the past three
four years.
Speaker 3 (09:28):
It was an environment where.
Speaker 4 (09:29):
We felt like we could afford to promote income equality
and you know, raise minimum wages. But now you have
a situation where our exports are getting smashed by the Chinese.
The emergence of deep sick has really made Koreans aware
that we are no longer that comfortable five ten years
or had the Chinese on technology, maybe some part on
(09:53):
certain terms, they've already surpassed us. And you know, obviously
terraf career when they get prettia from external front. I mean,
you do see them get behind the country and unite,
and we hope that that's what we're going to see.
And partially so, I do believe that this government will
(10:13):
be much more pro business than President Moon zero, but
doesn't mean that you will be extremely business friendly.
Speaker 3 (10:22):
I mean, look, you know it is a left wing government.
Speaker 4 (10:25):
There's going to be some setbacks and some hurdles to
clear along the way.
Speaker 1 (10:31):
Yeah, I'm curious about the China issue. You know, a
lot of countries globally are facing this China shock. You know,
first it was the US, other developed nations now where
you know, emerging markets are also dealing with this issue
of the flood of Chinese goods, and for South Korea
it seems to be getting worse in the past few years.
And it's not just steel, right, it's a number of commodities.
(10:54):
How does that kind of impact how you look at
investments in Korea and in the region.
Speaker 4 (11:00):
Obviously, you know, we cannot talk about that export competitiveness
without talking about our semiconductor sector. Yeah, just you put
up a bloomboog chart on Samsung Electronics share price, you
can already see there are problems there. Samsung used to
be on the cutting edge at least the generation or
(11:22):
head or the rest on their chip making. The fact
that they still haven't been able to get qualification from Nvidia,
it's a very new type of a problem for Koreans.
On the next generation of sectors that we're going to
lean into, which was evy batteries, we have an uncertain
policy environment there and also there is talk of supply clubs.
Speaker 3 (11:47):
So that doesn't seem like an easy runway to lift
off from.
Speaker 4 (11:51):
Without even talking about China, I mean, we have some
real challenges. And then, as I mentioned already, you have
China doing too career what career has been doing to Japan,
where we're able to eat market share at the mid segment,
the part that really volume kicks in. You know, China's
really just turned from a career as customers to competitors
(12:15):
just within five six, seven years.
Speaker 3 (12:18):
It's a very very short time for them to switch around.
Speaker 4 (12:21):
And I think, you know, Korean exporters are now really
trying to make that adjustment, and you see that some
company are still struggling to come to that reality.
Speaker 2 (12:31):
Better with this new president. Is there any sectoral implications.
Do you think certain sectors will perform better in some
worse with these new policies.
Speaker 4 (12:42):
Well, typically, you know, left wing government means that that
they'll do more stimulus, more social spending. Hopefully maybe they
can do some SoC infrastructure related product that will flow
into productivity gains, but we haven't seen that for quite
a while. So I hope that there will be more
directly with their fiscal spending rather than just sort of
spending it away on social support.
Speaker 3 (13:07):
Export front right.
Speaker 4 (13:08):
Wing typically will try to get behind the exporters, get
behind the chair balls. Again under President Moon, there was
a lot of scrutiny over the chapels, which is not
good for exporters or the stock market. I hope that
for the sake of our export competitiveness, President Lee will
look to really get behind these national champions. But in
(13:31):
terms of sector specifically, I do think that in this
current environment, regardless of the government that's taking power, that
the domestics sector should do better. I mean, ultimately, the
uncertainty that we have on the export front through tariffs,
and that's really a trumpionship up Korea, right. I mean,
every export trivene country is under the pressure of having
(13:51):
to design and strategize their export sectors on a tariff
freight which swings from ten percent to fifty And I
don't even know whether there is a point this year
where we can feel comfortable that we've seen the endgame
of this, because Press Trump seems to like to sort
(14:12):
of change his mind frequently and actually enjoy the fact
that he has such a big.
Speaker 3 (14:18):
Influence over the markets.
Speaker 4 (14:20):
So at what point do you feel comfortable that what
President Trump is trying to achieve on exports or tariffs
is done. I'm not sure that, you know, the next
six months is going to be enough. I think we
probably need one or two years of stability and transparent
before we feel like, Okay, you know, I think we
can now build those factories in wherever based on the
assumption that tariff uncertain product will be whatever. I think
(14:43):
that's a risk for not just Korea, but all export
driven countries.
Speaker 1 (14:48):
And just for our listeners who maybe don't follow the
news or don't watch k dramas, chebel is basically the
large family controlled companies in South Korea. So think of
your like Hundai's alga Is, Samsung, Yeah, very wealthy families.
Speaker 4 (15:03):
Yeah yeah, and all of them are wonderful clients of KB.
Speaker 2 (15:10):
It's a painter. Just on this corporate governance reform, you
alluded to the fact that the previous administration did set
up the Value Up Initiative to improve CREA's corporate governance.
Where do you see this going forward? Is this a
major focus for the government.
Speaker 3 (15:26):
So the backdrop on.
Speaker 4 (15:27):
Fairy Love program really, I think was sparked by the
success that we've seen from Japan, the Tokyo Stock Exchange
doing something like this for a number of years, but
it's only in the past couple of years that really
caught on and really welcomed by global investors. And you know,
Korea always still look at Japan for a lot of
its business models and policy making, and I think that
(15:50):
really just sort of hit the right spot. So the
Value of program, people consider it to be just sort
of like an effort to try to get the companies
to dividends, but I think it's much more than that.
It's really what the Japanese called income based growth, which
is basically, rather than growing through exports or going through GDP,
(16:10):
to really get better returns on capital and that capital
returned recycled back into financial assets and therefore consumption.
Speaker 3 (16:21):
Very difficult circle because you know, Japan has been trying
for a long time.
Speaker 4 (16:25):
China seems to be doing it a little bit, but
I think career is a little more urgent because of
the plummeting birth rates and the aging population really requires
to get better returns on its financial assets. I think
it's interesting that when the right wing government initiated it,
you typically expect the left wing party to just oppose
anything really, you know, whether it's the right policy or not,
(16:48):
they would just immediately oppose it. But they were very
quiet through that Value up program, and in fact, a
few months later they come up with what they called
Korea Boost. That program ironically right, it sounds very similar,
but based on really empowering minorary shelders by saying judicial
duty of auto directors for careing companies should be to
(17:11):
not just the majority sholders as it stands now, but
overall shelders and I think that bill was actually passed
through by the left wing party, but then it was
vetoed at the last stage by the right wing president.
He also the newly neglected president league have mentioned that
he's something he wants to do and get pass fully.
Speaker 3 (17:32):
This time around.
Speaker 4 (17:33):
So the corporate governance is actually important part do that's
the part that well, I think will get foreign investors
come back, who, by the way, just turned the net
buying after the election result. They've been debt sellers of
career market for nine consecutive months, I think the longest
period ever and by almost thirty billion dollars. So I
(17:55):
think the market bounced that we've seen. I think it
really requires foreigner horns come back, and I think foreign
as will be really encouraged by the corporate governance reform,
both combination of right wing government initiated value up and
also the corporate governents reform based on the commercial activision.
Speaker 1 (18:13):
Since you mentioned consumption, you know, I wonder given where
consumption levels are given a lot of the headwinds to
the economy from trade and trade policies from the US,
and of course we have the China issue with Chinese
dumping of certain goods and industries. I mean, how worried
(18:34):
should we be about a potential recession in South Korea
as early as this year or next year.
Speaker 4 (18:42):
Well, I mean risk is definitely there. You know the
Stoll rate of economic growth, which is anything below two percent,
you know you're on the brink of a recession, right.
It doesn't take much for you to go below two
and then below one, and then you know.
Speaker 3 (18:59):
One day you just build zero. So I think the
urgency is definitely there.
Speaker 4 (19:04):
I think a lot hines on obviously, exports for a
country or career. Typically, every government nowadays tries to manipulate
their way into avoiding that negative reading. I expect the
new Crewent government will try to do the same. But
I think it's really critical that we do what we
can to show that the government is moving in that
(19:28):
direction of pro growth rather than any other agenda. And two,
the ability for the left wing government, now empowered by
the National Assembly to really be effective in its policy making.
Effective means that not contradict itself, not get bogged down
(19:48):
by social agenda, but really just say, you know, growth
is number one. We get out of this risk of
recession and then we'll look at everything else. I think
that's going to be a very important message, and I
think that's what the market was interpreting his initial speech
to be. And let's hope that he can maintain that momentum,
because momentum is a wonderful thing, and Korean's love momentum.
(20:12):
You know, they do it in business models and they
do it in trading. You know, once a momentum set cryptos,
I mean they say momentum and anything, they'll get behind it.
And that's always been the powerful part about Korea. You know,
your little momentum really does wonders from Korea's perspective.
Speaker 2 (20:29):
Yeah, I know that Koreans love certain themes, like some
interesting things like crypto that were big into metaverse a
few years ago. Yeah, and you're obviously big into Tesla
stock as well. You're sitting in Seoul and you speak
to a lot of global investors. What's the reaction, Like,
we know the cost is up, but it's coming off
really low base. It's one of the worst performing in
(20:51):
this is last year, that's one of the best issue.
But do you get the sense that global investors are
really bullish on Korea or are still cautious fear.
Speaker 4 (20:59):
And it's definitely caught off guard by the AP performance
here today, and certainly I see them caught by surprise
of the balance.
Speaker 3 (21:08):
That we've seen in the past few days.
Speaker 4 (21:10):
As I mentioned, despite the AP performance here today, foreign
investors being.
Speaker 3 (21:15):
Consistently selling, so they've been selling into this APP performance,
so they're already probably underperforming as far as the positioning
on Creer goes well.
Speaker 4 (21:24):
Last couple of days, especially, I see short covering amongst
the hedge funds. And don't forget the short cell band
was lifted only a couple months ago, Okay, So I
think there was probably a lot of the hedge funds
now short in the market. Maybe they were doing market
neutral strategies, but I think a lot of them might
have actually used Korea shuttle band being lifted to actually
(21:46):
go net sell. So I think that clearly foreign investors
are taken aback by the recent market action, and I
think perhaps that's probably one of the reasons why in
the short term there's more upside.
Speaker 3 (22:00):
I mean, there's.
Speaker 4 (22:00):
Still foreign investors returning that thirty billion dollars in that
selling to just head that back. I mean, I think
you could have a significant impact on the.
Speaker 1 (22:10):
Market, you know, one thing, and sort of like the
elephant in the room. But one thing we haven't talked
about is the relationship between the US and South Korea
because the DPP is often seen as being a bit
more friendly or open to working with China and North Korea.
But of course that has implications for the relationship with
the US and getting a bilateral trade deal. So is
(22:33):
there some concern perhaps on that front that this could
mean kind of a rearranging of that relationship in Asia.
Speaker 4 (22:41):
I think that the question will be answered by President
Trump more than Presidently because I mean the way and
it applies to all of traditional allies of the US.
I mean, if you are attacking them on trade, which
seems to be not just based on trade either right
mixed in politics with these trade talks where US it put.
Speaker 3 (23:03):
The allies who have relied on the.
Speaker 4 (23:06):
US of that political alliance that is now losing its bearings.
So the harder US pushes on Korea on trade, I
think it really gives them a room for them to
maybe hedge or even shift towards China, regardless of the
political relations of the ruling party.
Speaker 3 (23:29):
So I think that's probably the more important thing.
Speaker 4 (23:33):
Again during President Moon era, you remember that bizarre romance
between Trump and Kim of North Korea, right, yes, And
you know, even in hindsight, we don't understand what actually
happened there. Now, who knows, you know, President trauma cat
boat one day and decide to have a go at
that again, and they really will throw people.
Speaker 3 (23:56):
Off, you know. So it's such a new era.
Speaker 4 (23:59):
I think it's one of the dangers of investment strategy
nowadays is to try to sort of revert back to
what happened in the past and say, well, this is
what happened now, similar thing will happen again, because.
Speaker 3 (24:10):
You look at it.
Speaker 4 (24:10):
I mean, just in the past five to ten years,
the world have changed, whatever we assume to be given.
I cannot think of anything that I can reliably say
history has done this and now we can just thank
that in right, I mean foreign affairs, geopolitical positioning, the
fact that we.
Speaker 3 (24:30):
Cannot have a war, I mean, you know, all of that.
Speaker 4 (24:33):
Just I think we just have to take every issue
on his merit, try to look at it very much
for the present, rather than reverting back to what we
saw before.
Speaker 1 (24:45):
Would be a good place to leave on yeah right.
Thank you so much for joining us on the podcast.
Speaker 3 (24:52):
Thank you very much. It's been a pleasure, a lot
of fun.
Speaker 1 (24:55):
You've been listening to Asia Centric from Bloomberg Intelligence and Katchitdmitreva.
Speaker 2 (25:00):
I'm John Lee. You can find all our episodes on
Apple Podcasts, Spotify, or wherever you listen. And this podcast
was produced and edited by Clara jan Thanks for listening,
See you next time.
E j m Jung where President Lee won South Korea's
presidential election last week, ending six months of uncertainty and
chaos following last year's martial law tobacco and the eventual
impeachment of former President Yunskul.
Speaker 2 (00:16):
Lee has promised a big stimulus package to boost the economy.
Investors like what they hear so far. The COSPY rose
near a bull market when the result was announced. The
index is up over seventeen percent vi SHE, making it
one of the best performing stock indices in the world.
Speaker 1 (00:33):
But President Lee faces a plethora of challenges, including the
threat of US tariffs on the country's highly export reliant economy,
a deeply divided electorate, and a rapidly aging population. Can
the new president revive Korea's economy and financial markets? And
what does this mean for its relationship with the US,
(00:54):
China and North Korea.
Speaker 2 (00:57):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong, and I'm.
Speaker 1 (01:02):
Katy Dmitrieva also here in Hong Kong.
Speaker 2 (01:05):
Today we have Peter Kim, Managing director and investment strategist
at KB Securities in Soul. Peter, Welcome to the show.
Speaker 3 (01:14):
Thank you.
Speaker 1 (01:14):
Thanks for joining us, especially so quickly after the results.
We're actually filming this or taping this the week prior
to when it will air, so I appreciate it.
Speaker 4 (01:25):
It's a very important time in Korea's development and history,
so hopefully we'll try to lay a better path and
better vision forward for creat a very critical time.
Speaker 1 (01:38):
I think, yeah, it's been a very rough few months.
I think we can say, how do you read the
election results?
Speaker 4 (01:48):
Six months of policy paralysis and the reason for that
paralysis being very brief but chocking martial law. I would
say that anything from now on has to be a
positive and I think the election result, the turnout was
almost at the historical high, which is meaningful, and also
(02:12):
the fact that we now have a government that is
empowered with the Legislative Assembly on its side. Hopefully that
will mean that there will be more proactive legislation being
passed and policies that will actually set a direction. So
I think you can see from the market reaction there's
(02:32):
a lot of hope that this will be a positive
turn and I think there are reasons to believe that
they could be very positive, especially because being a left
wing government now investors constantly look towards what we saw
during the last left wing government which is under President Moon,
and during that time, I think it's fair to say
(02:54):
a lot of investors thought it was very anti market,
anti business, and I think Presidentally, even though he's from
the same party, might surprise investors, was a very different version.
Speaker 1 (03:07):
So a bit less uncertainty, definitely.
Speaker 3 (03:11):
A lot less uncertainty.
Speaker 4 (03:12):
Hopefully that means positive surprises rather than negative surprises. Again,
like you know, if Ilways had a choice between a
paralysis but some big spag of progress versus some setbacks,
I would prefer action over a paralysis at a time
when you know, you get these external risks with karaphore
(03:34):
and geopolitical risk. I don't think any country can afford
to be in a leadership vacuum.
Speaker 5 (03:40):
Peter.
Speaker 2 (03:41):
Even before the martial law debacle and the eventual impeachment
of the previous president, Korea's economy was already slowing. It
was already, you know, quite weak. Do you think this
new president and his measures is enough to restart economic growth?
Speaker 3 (03:58):
Yeah?
Speaker 4 (03:58):
I mean it's important to understand that the marshal law
incident only in hands that we realized that we were
dealing with a very frustrated and very very much an
early stage of lame dub presidency, right, and that we
found out that the desperation that led to the marshal
law decision was that he was in a stonewalled in
(04:21):
every initiative that he took, and that he felt that
he didn't have the.
Speaker 3 (04:25):
Enough of a public backing and all that led to that.
Speaker 4 (04:28):
So I guess in handsight that slowing economy was part
of that.
Speaker 3 (04:33):
I think the new president.
Speaker 4 (04:37):
The first statement after the election result was that economic
growth was his top priority, and I think that really
reflects the general public perception that you know, as you
mentioned about birth rates, slowing, exports with the exporters being surpassed.
Speaker 3 (04:56):
By China, all of those factors.
Speaker 4 (05:00):
I think the Korean public is really cognizant of the
silent crisis that Korea faces. The Central Bank of Korea
just guide it for a zero point per cent GDPD share,
and I do believe I checked in it's it's probably
the first time outside of a crisis, an official crisis,
that we are going sub one percent. So I think
(05:24):
that is a pretty clear message that this government really
needs to photocite it's social agenda. Which it typically does
for the sake of growth at all costs.
Speaker 1 (05:34):
So how can the government actually engineer that kind of growth,
especially when we have a global trade war? And South
Korea is interesting because it's not just the bilateral trade, right,
it's sort of in the region globally kind of a
nuclear So a lot of goods passed through the country.
They import, export, hold in warehouses. You know, it's sort
(05:57):
of central in the supply chain. How could that kind
of growth be possible in that environment? Are there other
kind of levers or avenues for that growth?
Speaker 3 (06:07):
Yeah, I mean there's no magic here.
Speaker 4 (06:09):
I think amongst the top three policy agendas for both
sides during the election campaign was AI right people leaning
on AI to be the solution for the growth problems,
which I'm a little bit skeptical of, to be honest.
But how one can transform that technology into economic growth,
It's challenged that every country faces, so I'm not sure
(06:31):
whether we're alone in that part. Obviously, fiscal stimulus is
very typically left wing policy to lean into. I'm already
talking about stimulus package which were blocked just prior to
the martial art decision. Now they can have a free
runway to get that going. Probably that's an easy.
Speaker 3 (06:52):
Win over the longer term.
Speaker 4 (06:54):
I guess you know, right wing government last year initiated
that Value our program, which is to stimulate the capital markets,
try to get that capital flowing into the right companies.
That is, doing more for shareholder rights and rather than
just going for that export cycle driven growth, which is
what career historically depended on. Longer term, I continue to
(07:18):
look at how we can make labor productivity work. Now
that's the interesting part because President Moon, the last left
wing president, really went for the idea of job security
rather than job creation. So he did that you shrinking
(07:38):
of working hours, raising minimum wages, making labor market very rigid,
and that probably was a big part of current export
losing their competitiveness. Now, it would seem contradictory for the
same left wing party to promote labor flexibility, but that's
(07:59):
what I mean about procasing economic growth.
Speaker 5 (08:03):
Labor productivity, Labor market flexibility is extremely important part of
promoting growth and promoting export competitors, and I hope that's
what we're going to see in the coming twelve months.
Speaker 2 (08:17):
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(08:39):
If you like what you're hear, don't forget to subscribe
and share. So you're insinuating that the new government is
on the left, but you think it's going to be
much more pro business, much more practical than under the
previous left government.
Speaker 4 (08:54):
Moon, well, I think definitely relative to the Moon administration,
it will be more pro business simply because the times
have changed.
Speaker 3 (09:06):
During President Moon, he was empowered.
Speaker 4 (09:09):
From twenty seventeen to twenty and twenty one, right, and
that was when growth was pretty good. Our exports were
doing well. We didn't really have that plummeting birth rates.
Even though he was gradually declined, it didn't sort of
have that collapse that we saw in the past three
four years.
Speaker 3 (09:28):
It was an environment where.
Speaker 4 (09:29):
We felt like we could afford to promote income equality
and you know, raise minimum wages. But now you have
a situation where our exports are getting smashed by the Chinese.
The emergence of deep sick has really made Koreans aware
that we are no longer that comfortable five ten years
or had the Chinese on technology, maybe some part on
(09:53):
certain terms, they've already surpassed us. And you know, obviously
terraf career when they get prettia from external front. I mean,
you do see them get behind the country and unite,
and we hope that that's what we're going to see.
And partially so, I do believe that this government will
(10:13):
be much more pro business than President Moon zero, but
doesn't mean that you will be extremely business friendly.
Speaker 3 (10:22):
I mean, look, you know it is a left wing government.
Speaker 4 (10:25):
There's going to be some setbacks and some hurdles to
clear along the way.
Speaker 1 (10:31):
Yeah, I'm curious about the China issue. You know, a
lot of countries globally are facing this China shock. You know,
first it was the US, other developed nations now where
you know, emerging markets are also dealing with this issue
of the flood of Chinese goods, and for South Korea
it seems to be getting worse in the past few years.
And it's not just steel, right, it's a number of commodities.
(10:54):
How does that kind of impact how you look at
investments in Korea and in the region.
Speaker 4 (11:00):
Obviously, you know, we cannot talk about that export competitiveness
without talking about our semiconductor sector. Yeah, just you put
up a bloomboog chart on Samsung Electronics share price, you
can already see there are problems there. Samsung used to
be on the cutting edge at least the generation or
(11:22):
head or the rest on their chip making. The fact
that they still haven't been able to get qualification from Nvidia,
it's a very new type of a problem for Koreans.
On the next generation of sectors that we're going to
lean into, which was evy batteries, we have an uncertain
policy environment there and also there is talk of supply clubs.
Speaker 3 (11:47):
So that doesn't seem like an easy runway to lift
off from.
Speaker 4 (11:51):
Without even talking about China, I mean, we have some
real challenges. And then, as I mentioned already, you have
China doing too career what career has been doing to Japan,
where we're able to eat market share at the mid segment,
the part that really volume kicks in. You know, China's
really just turned from a career as customers to competitors
(12:15):
just within five six, seven years.
Speaker 3 (12:18):
It's a very very short time for them to switch around.
Speaker 4 (12:21):
And I think, you know, Korean exporters are now really
trying to make that adjustment, and you see that some
company are still struggling to come to that reality.
Speaker 2 (12:31):
Better with this new president. Is there any sectoral implications.
Do you think certain sectors will perform better in some
worse with these new policies.
Speaker 4 (12:42):
Well, typically, you know, left wing government means that that
they'll do more stimulus, more social spending. Hopefully maybe they
can do some SoC infrastructure related product that will flow
into productivity gains, but we haven't seen that for quite
a while. So I hope that there will be more
directly with their fiscal spending rather than just sort of
spending it away on social support.
Speaker 3 (13:07):
Export front right.
Speaker 4 (13:08):
Wing typically will try to get behind the exporters, get
behind the chair balls. Again under President Moon, there was
a lot of scrutiny over the chapels, which is not
good for exporters or the stock market. I hope that
for the sake of our export competitiveness, President Lee will
look to really get behind these national champions. But in
(13:31):
terms of sector specifically, I do think that in this
current environment, regardless of the government that's taking power, that
the domestics sector should do better. I mean, ultimately, the
uncertainty that we have on the export front through tariffs,
and that's really a trumpionship up Korea, right. I mean,
every export trivene country is under the pressure of having
(13:51):
to design and strategize their export sectors on a tariff
freight which swings from ten percent to fifty And I
don't even know whether there is a point this year
where we can feel comfortable that we've seen the endgame
of this, because Press Trump seems to like to sort
(14:12):
of change his mind frequently and actually enjoy the fact
that he has such a big.
Speaker 3 (14:18):
Influence over the markets.
Speaker 4 (14:20):
So at what point do you feel comfortable that what
President Trump is trying to achieve on exports or tariffs
is done. I'm not sure that, you know, the next
six months is going to be enough. I think we
probably need one or two years of stability and transparent
before we feel like, Okay, you know, I think we
can now build those factories in wherever based on the
assumption that tariff uncertain product will be whatever. I think
(14:43):
that's a risk for not just Korea, but all export
driven countries.
Speaker 1 (14:48):
And just for our listeners who maybe don't follow the
news or don't watch k dramas, chebel is basically the
large family controlled companies in South Korea. So think of
your like Hundai's alga Is, Samsung, Yeah, very wealthy families.
Speaker 4 (15:03):
Yeah yeah, and all of them are wonderful clients of KB.
Speaker 2 (15:10):
It's a painter. Just on this corporate governance reform, you
alluded to the fact that the previous administration did set
up the Value Up Initiative to improve CREA's corporate governance.
Where do you see this going forward? Is this a
major focus for the government.
Speaker 3 (15:26):
So the backdrop on.
Speaker 4 (15:27):
Fairy Love program really, I think was sparked by the
success that we've seen from Japan, the Tokyo Stock Exchange
doing something like this for a number of years, but
it's only in the past couple of years that really
caught on and really welcomed by global investors. And you know,
Korea always still look at Japan for a lot of
its business models and policy making, and I think that
(15:50):
really just sort of hit the right spot. So the
Value of program, people consider it to be just sort
of like an effort to try to get the companies
to dividends, but I think it's much more than that.
It's really what the Japanese called income based growth, which
is basically, rather than growing through exports or going through GDP,
(16:10):
to really get better returns on capital and that capital
returned recycled back into financial assets and therefore consumption.
Speaker 3 (16:21):
Very difficult circle because you know, Japan has been trying
for a long time.
Speaker 4 (16:25):
China seems to be doing it a little bit, but
I think career is a little more urgent because of
the plummeting birth rates and the aging population really requires
to get better returns on its financial assets. I think
it's interesting that when the right wing government initiated it,
you typically expect the left wing party to just oppose
anything really, you know, whether it's the right policy or not,
(16:48):
they would just immediately oppose it. But they were very
quiet through that Value up program, and in fact, a
few months later they come up with what they called
Korea Boost. That program ironically right, it sounds very similar,
but based on really empowering minorary shelders by saying judicial
duty of auto directors for careing companies should be to
(17:11):
not just the majority sholders as it stands now, but
overall shelders and I think that bill was actually passed
through by the left wing party, but then it was
vetoed at the last stage by the right wing president.
He also the newly neglected president league have mentioned that
he's something he wants to do and get pass fully.
Speaker 3 (17:32):
This time around.
Speaker 4 (17:33):
So the corporate governance is actually important part do that's
the part that well, I think will get foreign investors
come back, who, by the way, just turned the net
buying after the election result. They've been debt sellers of
career market for nine consecutive months, I think the longest
period ever and by almost thirty billion dollars. So I
(17:55):
think the market bounced that we've seen. I think it
really requires foreigner horns come back, and I think foreign
as will be really encouraged by the corporate governance reform,
both combination of right wing government initiated value up and
also the corporate governents reform based on the commercial activision.
Speaker 1 (18:13):
Since you mentioned consumption, you know, I wonder given where
consumption levels are given a lot of the headwinds to
the economy from trade and trade policies from the US,
and of course we have the China issue with Chinese
dumping of certain goods and industries. I mean, how worried
(18:34):
should we be about a potential recession in South Korea
as early as this year or next year.
Speaker 4 (18:42):
Well, I mean risk is definitely there. You know the
Stoll rate of economic growth, which is anything below two percent,
you know you're on the brink of a recession, right.
It doesn't take much for you to go below two
and then below one, and then you know.
Speaker 3 (18:59):
One day you just build zero. So I think the
urgency is definitely there.
Speaker 4 (19:04):
I think a lot hines on obviously, exports for a
country or career. Typically, every government nowadays tries to manipulate
their way into avoiding that negative reading. I expect the
new Crewent government will try to do the same. But
I think it's really critical that we do what we
can to show that the government is moving in that
(19:28):
direction of pro growth rather than any other agenda. And two,
the ability for the left wing government, now empowered by
the National Assembly to really be effective in its policy making.
Effective means that not contradict itself, not get bogged down
(19:48):
by social agenda, but really just say, you know, growth
is number one. We get out of this risk of
recession and then we'll look at everything else. I think
that's going to be a very important message, and I
think that's what the market was interpreting his initial speech
to be. And let's hope that he can maintain that momentum,
because momentum is a wonderful thing, and Korean's love momentum.
(20:12):
You know, they do it in business models and they
do it in trading. You know, once a momentum set cryptos,
I mean they say momentum and anything, they'll get behind it.
And that's always been the powerful part about Korea. You know,
your little momentum really does wonders from Korea's perspective.
Speaker 2 (20:29):
Yeah, I know that Koreans love certain themes, like some
interesting things like crypto that were big into metaverse a
few years ago. Yeah, and you're obviously big into Tesla
stock as well. You're sitting in Seoul and you speak
to a lot of global investors. What's the reaction, Like,
we know the cost is up, but it's coming off
really low base. It's one of the worst performing in
(20:51):
this is last year, that's one of the best issue.
But do you get the sense that global investors are
really bullish on Korea or are still cautious fear.
Speaker 4 (20:59):
And it's definitely caught off guard by the AP performance
here today, and certainly I see them caught by surprise
of the balance.
Speaker 3 (21:08):
That we've seen in the past few days.
Speaker 4 (21:10):
As I mentioned, despite the AP performance here today, foreign
investors being.
Speaker 3 (21:15):
Consistently selling, so they've been selling into this APP performance,
so they're already probably underperforming as far as the positioning
on Creer goes well.
Speaker 4 (21:24):
Last couple of days, especially, I see short covering amongst
the hedge funds. And don't forget the short cell band
was lifted only a couple months ago, Okay, So I
think there was probably a lot of the hedge funds
now short in the market. Maybe they were doing market
neutral strategies, but I think a lot of them might
have actually used Korea shuttle band being lifted to actually
(21:46):
go net sell. So I think that clearly foreign investors
are taken aback by the recent market action, and I
think perhaps that's probably one of the reasons why in
the short term there's more upside.
Speaker 3 (22:00):
I mean, there's.
Speaker 4 (22:00):
Still foreign investors returning that thirty billion dollars in that
selling to just head that back. I mean, I think
you could have a significant impact on the.
Speaker 1 (22:10):
Market, you know, one thing, and sort of like the
elephant in the room. But one thing we haven't talked
about is the relationship between the US and South Korea
because the DPP is often seen as being a bit
more friendly or open to working with China and North Korea.
But of course that has implications for the relationship with
the US and getting a bilateral trade deal. So is
(22:33):
there some concern perhaps on that front that this could
mean kind of a rearranging of that relationship in Asia.
Speaker 4 (22:41):
I think that the question will be answered by President
Trump more than Presidently because I mean the way and
it applies to all of traditional allies of the US.
I mean, if you are attacking them on trade, which
seems to be not just based on trade either right
mixed in politics with these trade talks where US it put.
Speaker 3 (23:03):
The allies who have relied on the.
Speaker 4 (23:06):
US of that political alliance that is now losing its bearings.
So the harder US pushes on Korea on trade, I
think it really gives them a room for them to
maybe hedge or even shift towards China, regardless of the
political relations of the ruling party.
Speaker 3 (23:29):
So I think that's probably the more important thing.
Speaker 4 (23:33):
Again during President Moon era, you remember that bizarre romance
between Trump and Kim of North Korea, right, yes, And
you know, even in hindsight, we don't understand what actually
happened there. Now, who knows, you know, President trauma cat
boat one day and decide to have a go at
that again, and they really will throw people.
Speaker 3 (23:56):
Off, you know. So it's such a new era.
Speaker 4 (23:59):
I think it's one of the dangers of investment strategy
nowadays is to try to sort of revert back to
what happened in the past and say, well, this is
what happened now, similar thing will happen again, because.
Speaker 3 (24:10):
You look at it.
Speaker 4 (24:10):
I mean, just in the past five to ten years,
the world have changed, whatever we assume to be given.
I cannot think of anything that I can reliably say
history has done this and now we can just thank
that in right, I mean foreign affairs, geopolitical positioning, the
fact that we.
Speaker 3 (24:30):
Cannot have a war, I mean, you know, all of that.
Speaker 4 (24:33):
Just I think we just have to take every issue
on his merit, try to look at it very much
for the present, rather than reverting back to what we
saw before.
Speaker 1 (24:45):
Would be a good place to leave on yeah right.
Thank you so much for joining us on the podcast.
Speaker 3 (24:52):
Thank you very much. It's been a pleasure, a lot
of fun.
Speaker 1 (24:55):
You've been listening to Asia Centric from Bloomberg Intelligence and Katchitdmitreva.
Speaker 2 (25:00):
I'm John Lee. You can find all our episodes on
Apple Podcasts, Spotify, or wherever you listen. And this podcast
was produced and edited by Clara jan Thanks for listening,
See you next time.
Hosts And Creators
John Lee
Tom Corbett
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