Political Turmoil in South Korea’s Conservative Camp: A Warning for Investors?

South Korea’s conservatives are in chaos. Just weeks before the June 3, 2025, presidential election, the conservative People Power Party (PPP) abruptly replaced its initial candidate, Kim Moon-soo, after a court ruling cleared the way for a contentious nominating process. The move, driven by factional infighting and pressure to unify behind former Prime Minister Han Duck-soo, has plunged the party into disarray—and investors into uncertainty. With liberal frontrunner Lee Jae-myung of the Democratic Party (DP) leading in polls by double digits, the split on the right could seal the conservatives’ fate. But what does this mean for South Korean markets?

The Political Crisis Unfolds

The PPP’s decision to cancel Kim Moon-soo’s nomination on May 10 came after Seoul’s central court rejected his legal challenge to block the party’s move. Kim, who won the initial nomination via a party convention, accused PPP leadership of staging a “political coup” and vowed retaliation. Meanwhile, Han Duck-soo, who served as acting president after the April removal of former leader Yoon Suk Yeol (for illegally declaring martial law in December 2024), joined the PPP and positioned himself as a unifying candidate.

The PPP now faces a May 11 deadline to finalize its new nominee, but the infighting has overshadowed policy debates. Lee Jae-myung’s campaign, by contrast, has seized the opportunity to dominate the narrative with detailed proposals on economic reforms and national security. Polls show Lee leading Han by 10 points and Kim by 14 points—a margin that suggests the conservatives’ disarray has already cost them dearly.

Market Implications: Stability vs. Uncertainty

South Korea’s stock market has historically been sensitive to political volatility. The KOSPI index, which fell sharply during Yoon Suk Yeol’s controversial tenure, now faces new risks as the presidential race tightens. Investors are already pricing in uncertainty:

The index has underperformed global peers since late 2024, with concerns over Yoon’s removal and now the PPP’s internal strife adding to investor caution. Sectors tied to government policy, such as semiconductors (Samsung Electronics: 005930.KS), automotive (Hyundai Motor: 005380.KS), and defense (Samsung Heavy Industries: 010770.KS), could see heightened volatility if the election outcome remains uncertain.

Sector-Specific Risks and Opportunities

1. Technology & Semiconductors: Samsung Electronics, the country’s economic bellwether, faces risks from potential shifts in tech policy. A Lee Jae-myung victory might prioritize domestic innovation over free-market approaches favored by conservatives, impacting R&D investments.
2. Automotive: Hyundai Motor, a major exporter, could benefit from a stable liberal government focused on trade agreements. However, uncertainty over North Korea policy—Lee has advocated for tougher measures—could strain regional trade.
3. Defense & Security: A Lee administration might escalate spending on military readiness amid North Korean provocations, favoring companies like Hanwha Defense (009200.KS).

Data-Driven Outlook

The PPP’s internal divisions are not just a political headache—they’re an economic one. A National Barometer Survey from May 8 found Lee leading Han by 10 percentage points in a head-to-head race, a margin that suggests the conservatives’ split has already cost them 15–20% of potential votes. If this trend holds, the DP’s victory becomes all but certain, likely bringing policy continuity on issues like corporate taxation and labor reform.

Meanwhile, the KOSPI’s 12-month forward P/E ratio of 11.2x (vs. a five-year average of 12.5x) reflects investor skepticism about the political climate.

Conclusion: Time to Hedge?

South Korea’s conservatives may have handed the election to the liberals before it even begins. With Lee Jae-myung’s lead unchallenged and the PPP’s infighting diverting attention from economic policy debates, investors should prepare for a DP victory—and its policy implications.

For now, defensive sectors like healthcare (e.g., Samsung Biologics: 054620.KS) and utilities (e.g., Korea Electric Power: 015760.KS) may offer refuge, while tech and industrials face near-term headwinds. The KOSPI’s valuation discount suggests markets are already pricing in political risk, but further volatility is likely until the election outcome is clear.

In the end, South Korea’s conservatives have proven that internal strife is a luxury they cannot afford—especially when the markets are watching.

This analysis synthesizes polling data, political timelines, and sector-specific risks to highlight the investment stakes of South Korea’s political turmoil. The path forward remains fraught with uncertainty, but the data points to one clear conclusion: stability is in short supply.