For stock market investors, South Korea is no doubt the biggest surprise this year.

Much of the attention on the Korean peninsula has been on rising tensions between the South and the North since late last year. At the same time, South Korea’s worsening relationship with China over the deployment of the THAAD anti-missile system has added complications for the Seoul administration.

The Blue House has further been embattled by the corruption scandal surrounding former president Park Geun-hye, and the widespread fallout for some of the country’s leading politicians and entrepreneurs.

It is remarkable that, despite these woes, South Korea has been one of the best performers among global stock markets this year. The Kospi Index has shot up over 13% since the beginning of the year, with half of the gains coming in the last fortnight amid uncertainties around the presidential election.

Markets fell slightly on Wednesday morning as it became clear that the Democratic Part's Moon Jae-in would be the next president — a victory that is likely to have deep implications for the country's powerful family-owned industrial conglomerates, or chaebols.

Korean chaebols should brace themselves for more challenges to their corporate restructuring efforts after Moon takes office. 

Moon, who lost marginally to Park in the presidential election five years ago, has taken a strong stance on lessening the chaebols’ dominance in the Korean economy. One of his election promises is to block families from keeping a firm grip on their businesses through complicated cross-shareholding structures.

The liberal candidate vowed to reduce the economy’s reliance on chaebols through levying higher taxes on bigger companies and increasing public sector employment. Moon, who was previously a human rights lawyer, has also proposed legislation to give minority shareholders and employees power to influence a company’s management and strategy.

Moon is tipped to challenge the ultimate ownership of some leading chaebols such as Samsung, Lotte and SK, all of which are looking to retain control in the middle of thorny succession plans.

This is particularly problematic because the government is itself an investor in many of these chaebols, and therefore plays an important role when it comes to corporate mergers between affiliates. Korea’s National Pension Service, which is overseen by the ministry of health and welfare and holds large stakes in many chaebols, could make or break large corporate merger deals.

The state pension fund is the second largest shareholder in all of the country’s three biggest listed companies, which are also the flagship entities of the respective chaebols. It owns 9.3% in Samsung Electronics, 10.2% in SK Hynix and 8.1% in Hyundai Motor. The trio account for over 30% of the Kospi Index’s weighting on a combined basis.

But there is reason for some guarded optimism among the chaebols. Moon will face a tough task of lobbying opposition parties to support his proposal to fight cheabols since Korea’s politics are still very much tied with business community.

But South Korea appears to be approaching a tipping point. The country's chaebols should no longer expect to enjoy the privilege they have long taken for granted.

This article it adapated from a pre-election piece on AsianInvestor's sister title, FinanceAsia.

For more on the outlook for investment in Korea, join AsianInvestor's Korean Institutional Investment Forum in Seoul on June 20.