President's Impeachment Passes, Stirring Significant Market Attention for Korean Won and Stock Market
The South Korean National Assembly recently passed the impeachment of President Yoon Suk-yeol, causing a rapid escalation in market response to this significant political event. Investors are closely observing the performance of the Korean won and stock market following the impeachment's approval. While market volatility is expected to settle in the coming days, it has not completely subsided.
On the last trading day of last week, the Korean won settled at 1435.45 against the U.S. dollar. Since early December, when President Yoon declared and then lifted martial law, the won has depreciated by over 2%. The market broadly perceives the impeachment's passage as signaling an end to the most considerable political uncertainty for the won, with short-term depreciation likely capped around 1444.
Korean Stocks Gradually Absorb Political Risks, Future Uncertainties Remain
The performance of the South Korean stock market has become a core indicator in this political upheaval. The benchmark KOSPI index rose 2.7% last week, recovering much of the losses triggered by the martial law order. This rebound reflects a gradual market assimilation of the expectations surrounding Yoon Suk-yeol's removal from office. However, the impeachment still requires approval from the Constitutional Court of Korea, which has 180 days to make a final decision. If deemed invalid, Yoon could be reinstated; if valid, a presidential election must occur within 60 days. This uncertainty may continue to affect market sentiment.
Central Bank and Policymakers Actively Stabilize the Market
Following the impeachment's passage, the Bank of Korea promptly expressed commitment to taking all necessary measures to stabilize the financial markets. The central bank expects that the vote outcome might help reduce market volatility while gradually restoring investor confidence.
Previously, the martial law issue significantly impacted South Korean financial markets, with the won's exchange rate against the dollar plunging and the bond market under pressure. Data showed that as of last Friday, the three-year bond futures had fallen by 16 basis points since December 2, to 106.78 points; the ten-year bond futures were down 77 basis points, to 119.25 points.
Investor Sentiment Cautious, Limited Momentum for Stock Market Rebound
Although the impeachment's approval is seen as a short-term positive, the room for a rebound in the South Korean stock market may be limited. The composite index has fallen about 6% so far this year, with analysts commonly viewing impeachment's resolution as addressing the primary recent market risk, insufficient to drive significant stock market gains on its own.
Institutional investors point out that future market trends will still depend on the Constitutional Court's final ruling, the uncertainty of the presidential election, and improvement in South Korea's domestic economic fundamentals.
The passage of President Yoon Suk-yeol's impeachment provides the market with some temporary relief, but political risks have not been entirely eliminated. The future trajectory of the Korean won and stock market will depend on the Constitutional Court's decision and subsequent policy responses, warranting investor vigilance regarding potential market volatility.
