Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

MOONJAEINNOMICS: This Book's Top 10 Highlights & My Thoughts

A Significant Increase in Minimum Wage in Korea

Capitalism in Korea: This Book's Top Seven Highlights & My Thoughts (Devil Is in the Details)

Korea's Holdco Candidates: One of the Best Performing Groups in Asia YTD & "Mr. G. Shepherd"

Thematic (Sector/Industry)

There has been a flurry of media reports in Korea in the past few days that have mentioned that Jang Ha-Sung (Chief of Staff for Policy) and Kim Dong-Yeon (Minister of Finance and Economy &amp; Deputy Prime Minister) may be ousted by the end of the year. It has been nearly a year and a half since the start of the Moon administration and many Korean people are unhappy with the state of South Korea's economy. Jang Ha-Sung and Kim Dong-Yeon are probably the two most important government officials in the Moon Jae-In administration who have the most influence on Korea's finance and economy. 
Despite the official denial by the Presidential Office, we believe there is a high probability (+80%) that these two important government officials will be removed from their posts by end of this year. Moon Jae-In will be looking to replace them with new personnel. In our view, the following are likely to be the major impacts on the Korean stock market:
<ul class="">
<li>
More pro-business policies - The Moon Jae-In administration is likely to shift its emphasis to a more moderate tone in 2019-2022 periods, especially taking on a more pro-business approach. </li>
<li>
The top 10 stocks that will benefit from a more moderate minimum wage increase and pro-business environment -  In our report <a href="https://www.smartkarma.com/insights/a-significant-increase-in-minimum-wage-in-korea" target="_blank" data-smartkarma-citation="insights:12125">A Significant Increase in Minimum Wage in Korea</a> (July 2017), we pointed out 10 stocks in Korea that would be negatively impacted by the significant increase in minimum wages.  These companies are mostly in the retail and construction sectors that tend to employ a lot of minimum wage workers. Therefore, a more moderate increase in wage hikes and other pro-business measures are likely to benefit these companies, including <a href="https://www.smartkarma.com/entities/6993" target="_blank" data-smartkarma-citation="entities:6993:1">E Mart Inc (139480 KS)</a>, <a href="https://www.smartkarma.com/entities/5876" target="_blank" data-smartkarma-citation="entities:5876:1">Bgf Retail Co Ltd (027410 KS)</a>, <a href="https://www.smartkarma.com/entities/3867" target="_blank" data-smartkarma-citation="entities:3867:1">Gs Retail Co Ltd (007070 KS)</a>, and <a href="https://www.smartkarma.com/entities/4292" target="_blank" data-smartkarma-citation="entities:4292:1">Hyundai Engineering &amp; Const (000720 KS)</a>.
</li>
</ul>

There has been a flurry of media reports in Korea in the past few days that have mentioned that Jang Ha-Sung (Chief of Staff for Policy) and Kim Dong-Yeon (Minister of Finance and Economy &amp; Deputy Prime Minister) may be ousted by the end of the year. It has been nearly a year and a half since the start of the Moon administration and many Korean people are unhappy with the state of South Korea's economy. Jang Ha-Sung and Kim Dong-Yeon are probably the two most important government officials in the Moon Jae-In administration who have the most influence on Korea's finance and economy. 
Despite the official denial by the Presidential Office, we believe there is a high probability (+80%) that these two important government officials will be removed from their posts by end of this year. Moon Jae-In will be looking to replace them with new personnel. In our view, the following are likely to be the major impacts on the Korean stock market:


More pro-business policies - The Moon Jae-In administration is likely to shift its emphasis to a more moderate tone in 2019-2022 periods, especially taking on a more pro-business approach. 

The top 10 stocks that will benefit from a more moderate minimum wage increase and pro-business environment -  In our report A Significant Increase in Minimum Wage in Korea (July 2017), we pointed out 10 stocks in Korea that would be negatively impacted by the significant increase in minimum wages.  These companies are mostly in the retail and construction sectors that tend to employ a lot of minimum wage workers. Therefore, a more moderate increase in wage hikes and other pro-business measures are likely to benefit these companies, including E Mart Inc (139480 KS), Bgf Retail Co Ltd (027410 KS), Gs Retail Co Ltd (007070 KS), and Hyundai Engineering &amp; Const (000720 KS).

