Market Hopes for Fall Defense, Warning of Moral Hazard from 'Lee Jae-myung Put'

The term 'Lee Jae-myung Put' is currently circulating in the stock market. This refers to market expectations or blind faith that the government will not tolerate stock price declines, a term likened to the 'Bernanke Put' when former Fed Chair Ben Bernanke protected the market through interest rate cuts and liquidity injections during the US financial crisis. However, this expectation is analyzed as a warning that it can fuel investor moral hazard, inflate stock market bubbles, and endanger the national economy.

The government recently intervened in the Samsung Electronics labor-management wage negotiation, leading to a tentative agreement. During this process, it showed a strong stance by mentioning the inevitability of invoking the emergency arbitration right if a strike occurred. However, academic and market analyses suggest that the consideration of invoking this right for semiconductors, a core strategic industry, may not have met the actual conditions for invocation, and Prime Minister Kim Min-seok's projection of '100 trillion won in damages' might have been exaggerated. The emergency arbitration right has been invoked only four times in the past 60 years, with previous governments adopting a cautious approach.

There are criticisms that this intervention could set a bad precedent for future similar situations. It is suggested that the government and the ruling party may have been cautious about invoking the emergency arbitration right due to the political disadvantage of tolerating strikes, which are disliked by shareholders, ahead of local elections.