South Korean new president-elect, Park Geun-hye, surprised the world by promising - as part of her campaign - to increase the KOSPI (the country's benchmark stock market index) by some 50% over the next five years. Many dismissed this as an unrealistic campaign rhetoric. The South Korean government clearly does not have that much control over the stock market, given the nation's large export sector that is dependent on external factors. But is targeting a strong equity market necessarily a bad government policy - particularly if the government wishes to accomplish this without directly interfering in the market? Many would feel that it is, simply because such a policy would be viewed as benefiting the wealthy. But in order to lift the equity market, one needs to make significant improvements to the overall economy. And taking for example the relationship between the US jobless claims and the S&P500, it is not difficult to see how Park Geun-hye's campaign promise may have resonated with South Korea's citizens - even those who are not shareholders.
So what's wrong with such a pro-business government policy? Clearly it means that South Korea's largest firms (chaebol) will continue business as usual - which is a concern for many (due to semi-monopolistic structure of some of these firms). But if companies "get back to the business of making money", the nation's economy is likely to benefit from better overall business environment.
Reuters: - Victory for Park Geun-hye, the 60-year old daughter of South Korea's former military ruler, in the election means the top chaebol - five of whom control assets worth 57 percent of gross domestic product in the world's 14th largest economy - can get back to the business of making money.KOSPI may not grow by 50% in the next 5 years. But there is something to be said for promoting policies that improve the nation's business environment, ultimately leading to growth in jobs and incomes. Why not then target the stock market? It is after all a "real time" independent judge of a nation's economic health.
ISI: - It’s quite interesting to see how a pro-business president [a new concept for many] approaches his/her job.
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