GO
Loading...

Can South Korea's New President Keep 'KOSPI' Pledge?

Thursday, 20 Dec 2012 | 4:59 AM ET
Park Geun-hye
Getty Images
Park Geun-hye

South Korea's first woman president-elect Park Geun-hye has made an ambitious campaign pledge. She has promised to lift the country's benchmark stock index to the 3,000 mark during her five-year term - a jump of more than 50 percent from current levels. But analysts say that may not be possible given the fact that the stock market is dependent more on external factors.

According to Shaun Cochran, the head of research for Korea at CLSA, the direction the stock market takes is beyond the control of the new president.

"She can certainly influence it, if she pursues good policy...but at the end of the day it's political rhetoric," Cochran said. "There's an expectation in Korea that politicians will make claims that people are going to be skeptical of and know they can't achieve because they know it's the electoral process."

(Read More: Loved and Loathed, Korea's Park Talks Tough After Win)

Eeik Lueth, senior regional economist at RBS, added that the call reminded him of the current President Lee Myung-bak's "747" promise, where he pledged to achieve 7 percent annual growth to make South Korea the seventh largest economy in the world. Lee had also vowed in 2007 to achieve the 5,000 level for the KOSPI before his term ended.

"The world would have to look very good for that I suppose," Lueth said. "Basically, it [the KOSPI] depends more on global stock markets, and the global economy than it does on Ms. Park."

News of Park Geun-hye's victory had little impact on the KOSPI, which closed up just 0.3 percent at 1,999.50, on Thursday, a day after the election result. The benchmark has risen only 0.3 percent this year amid global market volatility.

Asia's fourth largest economy has also seen lackluster economic growth, expanding just 0.2 percent in the third quarter from the previous quarter on declining exports to Europe and China. But, there have been recent signs of a recovery after exports marked their first back-to-back growth of the year of 3.9 percent in November from a year earlier.

Despite the KOSPI's poor performance this year, Wai Ho Leong, director and senior regional economist at Barclays Capital, says the index could hit the 3,000 mark over the next five years, if it can touch his target of 2,200 by the end of 2013.

"I think it's predicated on getting the policies in place to ensure the economy can reach its potential year after year - so keep the economy on a stable growth path and create opportunities for companies to grow," Leong said. "I think that alone should do the trick."

Park had said that she would help lift the stock market by creating new growth engines and more jobs, according to media reports.

-By CNBC's Rajeshni Naidu-Ghelani

  Price   Change %Change
KOSPI
---