Political Instability in South Korea Triggers Massive Withdrawal of Foreign Investments, Economy Faces Multiple Shocks
Wave of Foreign Investment Selloff Sweeps South Korean Market
South Korean President Yoon Suk-yeol's declaration of "martial law" has intensified political turmoil, prompting foreign investors to aggressively sell South Korean assets. According to data from the Korea Exchange on December 21, foreign investors' net sales in the South Korean stock market exceeded 3 trillion won (approximately 15.3 billion yuan) over the 13 trading days from December 4 to 20. On December 4 alone, the first day martial law took effect, foreign investors recorded a net sale of a staggering 407.9 billion won.
Multiple Reasons for Foreign Capital Withdrawal
An analysis by The Korea Herald suggests that the withdrawal of foreign capital is not due to a single factor. Besides the political instability caused by "martial law," other factors such as sluggish performance by companies like Samsung Electronics, the strengthening of the US dollar, and the depreciation of the Korean won have also underpinned the foreign selloff of South Korean assets. In recent years, the South Korean economy has encountered some pressure from changes in the global financial environment and declining corporate profits, and political unrest further exacerbates this situation.
Impact on Businesses and Economy
The disruption to South Korean domestic businesses due to political instability is also evident. A survey by the Korea Federation of SMEs indicates that nearly half (46.9%) of businesses such as restaurants and hotels experienced sudden cancellations of year-end event orders or faced other economic losses following the announcement of martial law. Even among businesses not directly affected by martial law, 46.6% of respondents are concerned that their future operations might face unfavorable impacts.
Outlook and Challenges
With the continued withdrawal of foreign investments and increasing political uncertainty, South Korea's stock market and economy face a dual pressure. Analysts point out that stabilizing the domestic political environment and restoring foreign investor confidence is South Korea's current top priority. At the same time, more attention should be given to enhancing the stability of the Korean won and boosting corporate profitability.
The South Korean economy is currently at a crossroads of global economic changes and domestic political fluctuations. Whether it can overcome these challenges will have a profound impact on its future economic development.
