South Korean construction and insurance stocks rallied on speculation the industries will benefit from the election of the ruling party’s Park Geun Hye as the nation’s president.
Hyundai Engineering & Construction Co., South Korea’s largest builder, jumped 4 percent after HSBC Holdings Plc said the government is likely to support the economy through the expansion of public housing. Dongbu Insurance Co. (005830) climbed 6.3 percent after Park’s victory over rival Moon Jae In, whose policies may have dragged on insurers’ earnings.
The Kospi index rose 0.3 percent to 1,999.50 at the close in Seoul. The gauge pared a gain of 0.7 percent amid concerns U.S. budget talks are stalling. Stocks resumed trading after a holiday yesterday for the polls, during which the MSCI Asia Pacific Index jumped 1.2 percent.
“While some individual sectors could get a short-term boost from the elections, the overall reaction is muted,” Chung Yun Sik, chief investment officer for equities at ING Investment Management Korea Ltd., which oversees about $20 billion, said by phone today. “There are ongoing concerns over U.S. budget negotiations and the Kospi (KOSPI) at the 2,000 level is prompting some investors to take profits.”
The Kospi has risen 5.8 percent in the past month and trades for 11.2 times estimated profit, near the highest level since January 2011. The gauge’s gain was limited today as officials from U.S. President Barack Obama’s administration told leaders of business and financial services groups that negotiations with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said.
Park, who takes over as South Korea’s president on Feb. 25, said on Dec. 18 that she will help the Kospi reach 3,000 within five years if she is elected. She has pledged stronger support for small- and medium-sized businesses, to help them compete with dominant exporters such as Samsung Electronics Co. and Hyundai Motor Co.
The Kospi Construction Index jumped 3.6 percent today, its steepest gain since Nov. 27 and the most of 19 industry groups. Hyundai Engineering climbed 4 percent to 72,600 won, while Daewoo Engineering & Construction Co. rose 4.8 percent to 10,050 won. GS Engineering & Construction Corp. (006360) added 4.3 percent to 58,200 won.
“We expect the overall construction sector to benefit from the election results because the government is likely to support the economy through the expansion of public housing” and investment in social infrastructure, HSBC analysts led by Herald van der Linde wrote in a report today.
Dongbu climbed 6.3 percent, the most since Sept. 27, 2011, to 45,500 won. Hyundai Marine & Fire Insurance Co. gained 5.8 percent to 32,900 won. Moon’s pledge to increase health insurance support by setting a cap on annual medical costs had created uncertainty about the outlook for private insurance companies, E*Trade Korea Co. said in a report today.
Woori Finance Holdings Co. rose 3.1 percent to the highest close in three months. Privatization of the South Korean financial company is expected to be brought up with the start of the new government, Hwang Seok Kyu, an analyst at Kyobo Securities Co., said in a note today.
EG Corp. (037370) led so-called Park Geun Hye-related stocks higher today, rising by the daily limit. EG, in which Park’s younger brother holds a stake, surged 15 percent to 44,550 won and Shinwoo Co., where Park’s sister-in-law previously served as a non-executive director, jumped 15 percent to 782 won.
“The election doesn’t make much difference one way or the other,” Mark Williams, chief Asia economist at Capital Economics Ltd., said by phone from London. “The significant factors for Korea are what happens to the global economy over the next few months. The immediate outlook is determined by what happens to exports.”
South Korea’s overseas shipments rose for a second month in November, evidence that a recovery is taking hold after the economy expanded at the slowest pace in three years in the third quarter. The economy is predicted to grow 2.4 percent this year, the slowest pace since 2009.
The iShares MSCI South Korea Index Fund (EWY:US), an exchange traded fund incorporated in the U.S., added 0.1 percent yesterday.
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