Stocks Show Mixed Reactions to Local Elections` Results

Stock prices were mixed Thursday after the ruling Grand National Party’s humiliating defeat in the local elections the day before.

Issues related to the government’s four-river restoration project, the revision to the Sejong City plan, and the bicycle sector all plummeted.

Stocks related to inter-Korean economic cooperation rose, however, on the belief that the worst-case scenario in cross-border relations will be avoided while Seoul’s policy momentum will weaken.

Those related to the four-river project tanked after rallying up until the local elections.

Stocks of Ee-Hwa Construction fell to the floor the same day after hitting the ceiling for five consecutive days.

Tuksu Engineering & Construction and Home Center also fell sharply, ending their five-day rally. Sammok Engineering and Ultra Construction also saw a big drop.

Stocks of Plumbfast, Yura Tech, and Nature & Environment, called beneficiaries of the Sejong City plan, also tumbled seven to 12 percent. Those of Samchuly Bicycle and A-Motion, which are classified as growth concept stocks for green growth, also dropped.

In contrast, stocks related to inter-Korean economic cooperation rallied. Emerson Pacific, which operates a golf resort at Mount Kumkang, watchmaker Romanson, which has a plant at the Kaesong industrial complex, and apparel manufacturer Shinwon all rose.

Companies transmitting electricity to North Korea also rose two to four percent.

With expectations for an express train project rising, related stocks rose one to three percent. The project is one of the main priorities of Gyeonggi Province Gov. Kim Moon-soo, who won reelection.

Stock analysts said, however, that effects of the election results will not last long.

In the 2002 and 2006 local elections, the ruling party’s defeat caused anxiety over existing government policies. Ten days after the elections, however, related stocks began to rally.

The KOSPI rose 31.44 points (1.93 percent) on the back of foreign net purchases of more than 260 billion won (216 million U.S. dollars) and closed at 1,661.84.

artemes@donga.com