Impeachment lifts the Kospi out of its ‘boxpi’
On Monday, Seoul’s benchmark Kospi reached 2,117.59, 20.24 points or 0.97 percent higher than Friday’s close.
Earlier in the trading day it ascended as high as 2,122.88, which is the first time the market has surpassed the 2,120 mark in nearly two years. The last time was May 29, 2015 when the Kospi reached 2,123.39.
The market lost steam later in the day as retail and institutional investors cashed out to profit from the recent upswing.
According to Korea Exchange, in the first two months of this year, the Kospi fluctuated in its narrowest band since related data started being compiled 30 years ago. On average it fluctuated 0.65 percent, earning the nickname “boxpi,” a combination of Kospi and the word box, meaning it’s boxed in.
Monday’s gains were a reaction to the Constitutional Court’s historic decision to uphold the impeachment of the country’s first female president for criminal and constitutional violations.
Monday’s upswing was particularly unusual as investors usually head for the wings on week the U.S. Federal Reserve holds its meetings. This week, investors have raised antennas as the consensus in the market is that Fed Chairwoman Janet Yellen will likely raise U.S. interest rates after a good jobs report announced over the weekend. Some analysts expect four raises in 2017.
“Until now there was a [Korea] discount even when Korean companies’ operating profit outlooks were expected to increase largely because of our political uncertainties,” said Lee Yong-gon, an analyst at Hana Financial Investment analyst said. “We expect it will normalize.”
Even global credit rating agency Moody’s Investors Service saw the situation positively.
“The conclusion of the impeachment process is credit positive for sovereign because it allows a new president to come in and focus on formulating policies that address Korea’s structural economic challenges amid growing domestic and external headwinds to growth,” Moody’s senior vice president Steffen Dyck wrote in a report released Monday.
On Friday, Fitch Ratings released a similar statement saying the constitutional court’s ruling “implies” the end of political uncertainty, which has held back economic activities and hurt consumer confidence.
It added that Korea’s political institutions appeared strong enough to ensure orderly resolution and not have a negative impact on the sovereign credit profile.
BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
with the Korea JoongAng Daily
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