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CHART 3: PERFORMANCE SINCE DECISION TO IMPEACH

130
125
120
115
110
105
100
95
90

Dec 2016 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017

MSCI KOREA
MSCI ACWI
MSCI ASIA EX. JAPAN
Source: Bloomberg

December 9, 2016 proved to be a pivotal point for the country. The large-scale protests seeking a permanent change from the cronyism that runs rampant within Korea were finally being heard.

It is no coincidence that since December 9, 2016, the MSCI Korea Index has outperformed as shown in CHART 3 the same indices it lagged during President Park Geun-Hye’s tenure. Investors and Korean citizens alike were finally sensing hope with the leading presidential candidates. Moon Jae-In’s eventual victory on May 10 secured the belief that a president in the Blue House was working for the people and not exclusively for the chaebols.

President Moon Jae-In has increased investor expectations for corporate reforms and it is critical for the nation to continue down this path of weakening family ties that maintain a stranglehold on the Korean economy. President Moon Jae-In has quickly appointed key members for advisory and cabinet roles that are aligned with the vision of eliminating corruption, enhancing corporate governance, and revitalizing a fractured economy.

"President Moon Jae-In has increased investor expectations for corporate reforms and it is critical for the nation to continue down this path of weakening family ties that maintain a stranglehold on the Korean economy."

Korea’s decision to install the Terminal High Altitude Area Defense system (THAAD) under the prior administration resulted in escalating political tension between China and South Korea. In the weeks leading up to President Park’s impeachment hearings, China discouraged its citizens from traveling to Korea and restricted the sale of Korean consumer goods. President Moon Jae-In has moved swiftly to improve the crumbling relationship with China by reevaluating the deployment of the system. A friendly call with President Xi Jinping after his election gradually improved the relationship and is expected to help navigate the complex political relationship with North Korea.

President Moon Jae-In, who was once the Chief of Staff to President Roh Moo Hyun (1998-2008), assisted President Roh in implementing the “Sunshine Policy.” The Sunshine Policy was an attempt by the South Korean government to engage North Korea with a softer, humanitarian stance in an effort to build a peaceful relationship. President Moon will likely reengage communications with North Korea in a similar manner.

The president appointed Jang Ha-Sung, formerly the dean of Korea University’s Business School, to the position of Chief of Staff for Policy. Jang Ha-Sung is a familiar face within the world of corporate reform as the founder of the People’s Solidarity for Participatory Democracy (PDSD), a civil organization pursuing shareholder reform. The PDSD was formed in the late 1990s and successfully fought for minority shareholders in legal battles against SK Telecom, Samsung Electronics, and others.

Another governance advocate with a boisterous history of shareholder activism, Kim Sang-Jo, a professor of economics at Hansung University and executive director of “Solidarity for Economic Reform” (SER) was appointed as the Head of the Fair Trade Commission (FTC) in early June. Kim Sang-Jo and Jang Ha-Sung are longstanding allies in the field of corporate activism with Mr. Kim succeeding Mr. Jang as first chairman of PDSD’s future organization in 2006.

The Korean stock market has been a star performer in 2017 with the KOSPI up approximately 24%, year-to-date in $USD basis and outperforming neighboring markets, such as Japan,

1 2 GLOBAL FORESIGHT THIRD QUARTER 2017
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