South Korea's Political Chaos: A Conservative Comeback or a Bear Market in Disguise?

The People Power Party (PPP) of South Korea has been in turmoil since its May 2025 nomination drama, with candidate Kim Moon-soo’s reinstatement after a leadership-backed “coup” exposing deep rifts within the conservative bloc. This political instability raises critical questions for investors: How will South Korea’s economic trajectory be affected? Can the PPP’s fractures be papered over in time for the June 3 election, or is this the start of a prolonged bear market for conservative policies and their economic correlates?

The Political Rollercoaster: A Party in Crisis

Kim Moon-soo’s victory in the PPP primary—securing 56.5% of the vote—was swiftly overturned when party leaders, aligned with impeached President Yoon Suk-yeol, replaced him with former Prime Minister Han Duck-soo. The move, framed as a bid to unify conservatives and counter liberal frontrunner Lee Jae-myung’s 43% lead, backfired when party members rejected the change. Kim’s reinstatement and the interim leader’s resignation underscore a party riven by factionalism.

The PPP’s internal strife mirrors broader societal polarization. Kim’s hardline stance—opposing Yoon’s impeachment and advocating a hawkish North Korea policy—appeals to the base but risks alienating moderates. Meanwhile, Han Duck-soo’s reformist pitch (e.g., anti-corruption drives and nuclear submarines) struggles to gain traction against Lee’s dominance.

Economic Implications: A Fragile Recovery

South Korea’s economy, heavily reliant on exports and tech manufacturing, is already under pressure from U.S. protectionism. shows a widening gap as geopolitical tensions and domestic instability weigh on investor confidence.

The PPP’s chaos exacerbates these risks. A Yoon-aligned PPP government might double down on confrontational foreign policies (e.g., North Korea, Japan), while a reformist PPP or a Lee-led Democratic Party could pivot toward economic pragmatism. However, Lee’s legal battles—five ongoing trials, including a Supreme Court-ordered retrial—create uncertainty.

Sectors to Watch: Tech, Autos, and Trade Exposures

1. Semiconductors and Tech: Samsung (005930.KS) and SK Hynix (000660.KS) face U.S. tariffs on chips and semiconductors, a direct result of Seoul’s political paralysis. reveal vulnerabilities if trade tensions escalate.
2. Automotive: Hyundai (005380.KS) and Kia face U.S. tariffs on cars, squeezing margins. A PPP victory might push for aggressive bilateral trade talks, but a Lee administration could prioritize domestic job creation over concessions.
3. Defense and Infrastructure: Han Duck-soo’s nuclear submarine plan and urban development proposals (e.g., satellite cities) could boost companies like Hyundai Heavy Industries (009150.KS) if the PPP unites behind him.

Risks: Geopolitical Volatility and Market Sentiment

The PPP’s inability to present a coherent platform risks prolonged political instability. A Lee win could further polarize the electorate, with his populist policies (e.g., wealth redistribution) unsettling markets. Meanwhile, the U.S.-ROK alliance’s fragility—exemplified by Seoul’s exclusion from Trump’s Indo-Pacific strategy—adds a wildcard.

Conclusion: A Bear Market in Politics, a Bull Market in Caution

South Korea’s conservatives have papered over their fractures for now, but the PPP’s May turmoil signals deeper institutional decay. Investors should treat this as a cautionary signal:
- Short-term: Avoid overexposure to Korean equities (e.g., KOSPI) until post-election clarity emerges.
- Long-term: Favor companies insulated from trade wars (e.g., global tech leaders like Apple (AAPL) with Korean supply chains) over domestic plays.

The data is stark: Lee’s 43% lead vs. Kim’s 29% suggests the PPP’s best-case scenario is a narrow loss. If the party splinters further, South Korea’s economy could face a prolonged bear cycle. For now, the safest bet is to wait for the smoke to clear—and hope the next leader can unite a divided nation.

The widening deficit underscores how Seoul’s political instability is compounding external economic risks—a trend investors ignore at their peril.