South Korea Stocks Watch Lee's Policy and Legal Risks

The comments came as local newspapers split sharply over the same message. Chosun Ilbo emphasized that Lee was “encouraging hardliners,” while Korea Economic Daily said there remained “room for cancellation of the indictment,” reflecting the market’s view that the legal exposure has not been fully removed even after Lee asked for deletion of a provision allowing transfer and disposal of existing cases under a special counsel law.

For investors, the immediate issue is not a constitutional amendment, but policy continuity. Lee’s denial of any interest in a second term should reduce some political noise, yet his refusal to fully shut the door on possible indictment cancellation leaves open questions about the durability of the administration’s legal and institutional agenda.

The backdrop is a government trying to regain control after a drop in public support and intraparty friction. Lee apologized for the fall in his approval rating, blamed himself for not showing enough empathy and communication, and tried to unify factions inside the Democratic Party by calling pro-Moon, pro-Noh, pro-Kim Dae-jung and pro-Lee groups allies rather than rivals.

The property market remains the other major investor focal point. Lee doubled down on a supply-heavy housing strategy, pledging faster land development, reconstruction, redevelopment and urban renewal, while describing the widening gap between Seoul’s wealthy districts and the outskirts as a “flattening” process.

That framing drew criticism because it suggests the administration is still relying on broad supply promises rather than immediate demand-side pressure or tax changes. Seoul apartment prices have risen for 84 straight weeks, and investors in construction, mortgages and real estate-linked assets will be watching whether the government can translate rhetoric into actual permits, starts and completed units.

The currency and Korea-linked exchange-traded fund also reflect the market’s sensitivity to these policy and political swings. The won was last around 1,355.83 per dollar, while the iShares MSCI South Korea ETF, EWY, traded at $189.16 on Monday, above its 50-day moving average of $173.51 and 200-day average of $151.99, after recent volatility that has left momentum indicators mixed. The ETF’s relative strength index at 56.5 suggests the rebound still has room, but not without risk.

For now, the key question for investors is whether Lee’s effort to reset the narrative on governance and housing will translate into calmer policy execution, or whether the mix of legal uncertainty, ruling-party infighting and sticky housing inflation keeps South Korea assets sensitive to every political headline.