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Politics

South Korean stock pickers react to Moon's administration

High-tech is in, heavy industry is out as the president sets his priorities

Hanmi's R&D Center in Gyeonggi-do, South Korea (Courtesy of Hanmi Science)

SEOUL Shares in Hanmi Science and LG Display have soared in the month since South Korean President Moon Jae-in took office on May 10, while SK Innovation and Korea Electric Power, or Kepco, have seen their stock tumble, illustrating the wide disparity in reactions to the new administration's economic policies.

Drugmaker Hanmi's shares jumped 33.42% to 87,000 won between May 8 and June 9, making it the biggest gainer of the 42 South Korean companies included in the Nikkei's Asia300 index. Panel maker LG Display saw the second-biggest rally, rising 20.72% to 36,700 won during the same period. The benchmark Kospi index rose 3.87% to 2,381.69 over the month.

The Moon administration is keen to promote pharmaceuticals and biotechnology as part of its strategy to nurture new high-value businesses.

"Investors picked up blue chips in the pharmaceutical and bio industry that had underperformed before," said Han Byung-hwa, an analyst at Eugene Investment & Securities. "Expectations for big pharma companies' licensing deals in the second half also whetted their appetites."

Shares of Celltrion, South Korea's largest biosimilar company, rose 6.96% to 101,400 won during the first month of Moon's presidency. The Incheon-based company exports medicines to the European and U.S. markets, including its flagship immune disease treatment, Remsima, which has a 40% market share in Europe.

Tech companies have also enjoyed a sharp rise in their stock prices, thanks in part to the Moon administration's support for artificial intelligence and big data. Shares in internet company Kakao rose 15.57%, while web portal Naver's stock jumped 14.67% over the last month. Kakao is investing in voice-activated assistant software, while Naver is testing autonomous driving technology on the country's roads, having won a license from the transport ministry.

POWER DOWN However, not all companies are happy with the new order. SK Innovation, which fully owns South Korea's largest oil refiner, SK Energy, has seen its stock tumble 8.72% and state-run utility Kepco saw its shares drop 4.69% over the past month, as investors expect Moon to shift resources toward renewables and away from fossil fuels.

"The Moon Jae-in administration is pursuing plans to cut coal-powered generation, while increasing generation from [liquefied natural gas]. This is raising concerns for Kepco, which relies on cheap coal for more than half of its fuel budget," said Shon Ji-woo, an analyst at SK Securities.

Shares of Hyundai Engineering & Construction dropped 3.68% on fears the new administration may impose new restrictions on the real estate market.

Korea Aerospace Industries, the state-run defense company, saw its shares slip 0.62% over the period amid rising tensions with North Korea. However, analysts said its shares are likely to rise over the long term as the Moon administration has vowed to invest in defense.

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