Global investors dumping Korean stocks as Yoon narrowly dodges impeachment

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Global investors dumping Korean stocks as Yoon narrowly dodges impeachment

Published: 06 Dec. 2024, 17:23 Updated: 08 Dec. 2024, 18:48

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,428.16, down 13.69 points, or 0.56 percent, and the won trading at 1,419.2 per dollar as of 3:30 p.m., up 4.1 won, at the close of trading on Friday. The Kosdaq closed at 661.33, down 9.61 points or 1.43 percent. [NEWS1]

Foreign shareholders have been mass off-loading Korean stocks since President Yoon Suk Yeol abruptly declared emergency martial law, notably in the financial sector, in which overseas investors hold a significant stake.

Foreigners net sold 1.009 trillion won ($710.4 million) of Korean shares in the four days since the president's late Tuesday announcement, according to Yonhap Infomax data released Sunday, around 710 billion of which came from the financial sector. The industry was a key beneficiary of the Yoon administration's Corporate Value-Up Program, which was launched to address the perceived undervaluation of Korean stocks.

Korean shares closed lower on Friday while the local currency slumped to its lowest level in two years against the dollar, continuing to drop even after the National Assembly's prompt overturn of the declaration.

Foreigner investors remained on a selling spree for the third consecutive session, and even retail investors, who had been cushioning the stock market decline since Wednesday, turned net seller as President Yoon’s People Power Party (PPP) signaled a shift toward supporting his impeachment.

Yoon avoided an opposition-led impeachment attempt Saturday after his party's lawmakers boycotted the parliamentary vote.

The Kospi fell 13.69 points, or 0.56 percent, to close at 2,428.16 on Friday. The benchmark index opened higher in the morning but took a downturn after PPP chief Han Dong-hoon called for the president's “immediate suspension from duty,” falling as low as 2,397.73 at around 11 a.m.

The Kosdaq lost 9.61 points, or 1.43 percent to close at 661.33, the lowest point since October 2022. The index plunged to a new four-year low of 644.39 mid-trading.

On Friday, foreigners off-loaded shares worth 309.4 billion won on the Kospi bourse, remaining a net seller for the third straight session. Retail investors broke their two-day buying streak, selling a net 577.7 billion won. Institutions net bought 826 billion won.

Retail investors pulled out of the Kosdaq as well, selling 174.8 billion won, while foreigners picked up 35.2 billion won and institutions bought 141.6 billion won.

“The Kosdaq, where retail investors account for a significant stake, expanded its fall due to panic selling by retail investors,” noted Lee Jae-won, an analyst at Shinhan Investment & Securities.

“The scope of the decline was bigger for the Kosdaq compared to the Kospi during the past two impeachment trials,” said Lee, adding that small-cap stocks are more vulnerable to the ongoing political strife.

Foreign investors' stake in the financial sector dropped the most among Korea's 21 major sectors following the emergency martial law declaration. Their shareholding ratio in the financial sector dropped by more than 1 percentage point, from 37.19 percent on Tuesday to 36.12 percent on Friday.

The won-dollar exchange rate closed at 1,419.2 per dollar as of 3:30 p.m., up 4.1 won from the previous session, after peaking at 1,429.2 won earlier that day.

The won-dollar closing rate, which first surged to a two-year high on Wednesday in the aftermath of the martial law declaration, has been on a depreciation trend since then.

As the market remains wary of the persistent political turmoil, the financial authorities are still rolling out a series of messages to reassure investors that the Korean economy remains stable.

Minister of Economy and Finance Choi Sang-mok speaks during a meeting with chairs of six foreign chambers of commerce in Korea in central Seoul on Friday. [MINISTRY OF ECONOMY AND FINANCE]

On Friday, Minister of Economy and Finance Choi Sang-mok met with the chiefs of six foreign chambers of commerce in the country, including the American Chamber of Commerce in Korea in order to provide an assurance that the martial law decree has been revoked through a due process and Korea’s economic system is operating as usual.

Addressing the rising concerns over the Yoon administration’s policy drives losing momentum, economic chiefs including Choi said that policy initiatives aimed at mid- to long-term structural reforms, including the Corporate Value-up Program, “will proceed as planned without falter.”

The statement by the Ministry of Economy and Finance came out after an Emergency Meeting on Macroeconomic and Financial Issues that day, which has been taking place on a daily basis since Wednesday.

Update, Dec. 8: Added Yonhap Infomax data from Sunday.

BY SHIN HA-NEE [[email protected]]