Has the Kospi become Korea’s real election battleground?

Chung Hyo-shik

The author is the social news editor at the JoongAng Ilbo.

At a recent dinner gathering with longtime acquaintances, the conversation turned to the June 3 local elections and the races for mayor in Seoul, Busan and Daegu. Some argued that fluctuating opinion polls showed the contests tightening within the margin of error and suggested momentum was shifting late in the campaign. Others pointed to surveys still indicating a sweeping victory for the ruling party.

Yet the debate eventually moved elsewhere — to the stock market.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 7208.95 points on May 20, down 62.71 points, or 0.86 percent, from the previous trading session. [NEWS1]

Specifically, the discussion centered on labor unrest at Samsung Electronics and rising U.S. interest rates driven by high oil prices, both of which have increased volatility in shares of Samsung Electronics and SK hynix. Before long, someone remarked that whether the Kospi index could remain above 7,000 through election day might ultimately determine the outcome of the Seoul mayoral race.

Has Korea entered an era of “Kospi democracy?”

The following day, Samsung Electronics’ labor union officially declared negotiations with management had collapsed, making a general strike on Thursday appear inevitable. In response, the government warned it could invoke emergency arbitration powers to force a suspension of the strike.

Prime Minister Kim Min-seok stated in a televised address on Sunday that the government “cannot avoid considering all available measures, including emergency arbitration, in order to protect the national economy.” President Lee Jae Myung reinforced the message the following day, saying labor rights must be respected but so too must corporate management rights.

With less than two weeks remaining before the election, the government appeared determined to defend Samsung Electronics’ stock price and prevent a broader collapse in the Kospi.

The reasons are understandable. Virtually the entire country has become a stakeholder in the stock market. As of the end of last year, Samsung Electronics alone had 4.61 million shareholders while SK hynix had 1.18 million. Since the end of last year, the number of domestic stock trading accounts has risen from 98.29 million to 106.06 million by mid-May, when the Kospi briefly surpassed 8,000 during intraday trading — an increase of roughly 8 million accounts.

With retail investors surging, a sharp market decline would quickly become a political problem for the government itself. President Lee’s signature campaign pledge of a “Kospi 5000 era” may already have been surpassed, but allowing the market to fall from above 7,000 back into the 5,000 range would create a very different political shock.

The Kospi’s market capitalization stood at 6,536 trillion won ($4.33 trillion) on May 14. A fall to the 5,000 range would erase more than 20 percent of household asset value, reducing market capitalization to roughly 5,000 trillion won. For the president, the political risks are enormous.

The possibility of invoking emergency arbitration against a union strike is itself unusual under a progressive administration traditionally aligned with organized labor. If exercised, it would mark the first such intervention in 21 years since the Roh Moo-hyun administration halted strikes at Asiana Airlines and Korean Air in 2005.

The irony is difficult to ignore. Last September, the ruling bloc pushed through the so-called Yellow Envelope Law, a revised labor law expanding the range of labor disputes to include management decisions such as bonus distribution. Critics argue the legislation helped create the conditions for the current performance bonus strike at Samsung Electronics.

Now, after enabling broader labor action, the government is considering one of the strongest possible measures to stop it. Other unions at companies including Kakao, HD Hyundai Heavy Industries and LG U+ are also entering negotiations and strike procedures while demanding bonuses linked directly to operating profits.

Members of the Joint Struggle Headquarters of the Samsung Electronics labor union hold a large-scale rally near the company’s Pyeongtaek campus in Gyeonggi on the afternoon of April 23. [Kim Kyung-rok]

The controversy extends beyond labor disputes. Debate has also intensified over how to use excess tax revenue generated by booming semiconductor profits. Kim Yong-beom, the presidential chief of staff for policy, recently proposed a form of “national dividend,” arguing such revenue could help cover what he described as “system maintenance costs.”

Meanwhile, Gyeonggi education superintendent candidate Ahn Min-seok proposed giving all first-year middle school students investment funds worth 1 million won and entrusting asset management companies to manage the funds until students graduate from high school.

Critics responded angrily, arguing such proposals focused more on immediate distribution ahead of elections than on reducing government debt or reinvesting in AI and semiconductors to create jobs for younger generations.

The deeper concern is that repeated efforts to prioritize stock market defense whenever political or economic crises emerge may ultimately prove neither sustainable nor healthy for Korea’s democracy itself.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.