Tue, Dec 10, 2024 page9

• South Korean stocks and won slump

  • Bloomberg
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  South Korean stocks tumbled and the won approached its weakest level since 2009 following a weekend of political turmoil that left investors bracing for a period of heightened volatility.

  The benchmark KOSPI dropped 2.8 percent, and the small-cap KOSDAQ index slumped more than 5 percent to its lowest since April 2020. The won fell about 1 percent against the US dollar, heading toward levels reached in the immediate aftermath of South Korean President Yoon Suk-yeol’s botched imposition of martial law early last week.

  The main opposition party has said it would push quickly for another vote. While officials in Seoul are pulling out all the stops to prevent a market meltdown, uncertainties over the country’s leadership have cast a pall on sentiment.

  

  A woman walks past a screen displaying the benchmark KOSPI, left, and tech-laden KOSDAQ, right, tumbling 2.78 percent and 5.19 percent respectively inside a dealing room at Hana Bank in Seoul yesterday.

  Photo: EPA-EFE

  “The possibility of the worst-case scenario for the KOSPI has increased,” Daishin Securities Co strategist Lee Kyoung-min said. “Even at a small development, the KOSPI can wobble because of accumulated fatigue, disappointment, extremely dented investor sentiment and supply and demand situations.”

  With Yoon facing intense pressure to resign, ruling People Power Party leader Han Dong-hoon on Sunday said South Korean Prime Minister Han Duck-soo would manage the nation’s affairs while his party prepares an orderly exit plan for the president.

  Opposition lawmakers slammed the decision as unconstitutional and thousands of people took to the streets to protest.

  The standoff could not have come at a worse time for local markets. The KOSPI gauge and the won were among Asia’s worst performers this year even before the martial law fiasco.

  Investors were pinning their hopes on the country’s leadership to navigate an uncertain global trade environment following US president-elect Donald Trump’s election win.

  The “Value-Up” initiative — a program to improve corporate governance and shareholder returns — was also in need of a stronger push to reinvigorate the flagging stock market.

  Financial authorities would mobilize “every possible measure” to minimize the impact on the economy and closely monitor its financial markets around the clock, a joint ministerial statement released yesterday said.

  They plan to launch a 300 billion won (US$210 million) fund next week to buy “Value-Up” stocks to help shore up the market, while continuing to deploy the earlier 200 billion won fund.

  The 10 trillion won stock stabilization fund is ready to be mobilized “immediately” when needed, the statement said.

  While the fund would attempt to turn around investor sentiment, the size would not be enough to quell market fear, Fibonacci Asset Management Global Pte Ltd chief executive officer Jung In-yun said.

  As for the South Korean currency, the won has lost more than 2 percent against the US dollar as the political drama unfolded, the only emerging Asian currency to fall against the greenback. Further losses would see the currency reach levels unseen since 2009.

  Goldman Sachs Group Inc maintains a below-consensus growth forecast of 1.8 percent next year for South Korea, with “risks increasingly skewed to the downside,” the US investment bank said in a note.
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