Yoon's removal sends Korean stocks on roller coaster ride

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Yoon's removal sends Korean stocks on roller coaster ride

Published: 04 Apr. 2025, 19:27 Updated: 04 Apr. 2025, 19:30

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 2,465.42 points on April 4, down 21.28 points, or 0.86 percent, from the previous trading session. [YONHAP]

As the official ouster of impeached President Yoon Suk Yeol cleared up quite a bulk of domestic uncertainty, some analysts are cautiously nudging their annual projection for the Korean stock market upward and those of the won-dollar exchange rate downward.

But the outlook remains far from rosy, as burgeoning U.S. tariff concerns and the persistent foreign capital outflow continue to weigh heavily on the export-driven economy. With U.S. President Donald Trump's reciprocal tariffs looming large overhead, eyes are now on the fiscal policy direction and upcoming presidential election — which will play a key role in shaping the country's economic trajectory.

Kospi loses, won wins

Seoul shares continued their losing streak for the third day in a row on Friday after a roller coaster ride through the long-anticipated verdict of the former president’s impeachment trial. The local currency's value, on the other hand, rose sharply against the dollar throughout the day, soaring at its fastest pace in more than two years.

The Kospi closed at 2,465.42, down 0.86 percent, or 21.28 points, from the previous session.

The benchmark index fluctuated significantly that day. After opening more than 1 percent lower from Thursday’s close, rattled by steep losses on Wall Street overnight, the Kospi took an upturn ahead of the Constitutional Court’s 11 a.m. ruling announcement and reached 2,506.71 at 11:13 a.m. while acting Chief Justice Moon Hyung-bae was reading out the verdict.

However, after the 22-minute recitation of the verdict, the index almost immediately reversed course again, falling to 2,438.02 at around 2:10 p.m. as foreign investors sped up their tech stock sell-offs. SK hynix dropped 6.37 percent to 187,900 won, and Samsung Electronics fell 2.6 percent to 56,100 won.

Foreigners once again drove the decline that day, net offloading shares worth a whopping 1.79 trillion won ($1.24 billion) as the shockwave of Trump’s sweeping tariff announcement continued to push investors toward safe haven assets. Retail investors and institutions somewhat cushioned the drop, picking up 1.07 trillion won and 621 billion won, respectively.

Meanwhile, the won was trading at 1,434.1 per dollar as of 3:30 p.m., a sharp 32.9 won decline from the previous session’s close. This is the won’s strongest point against the greenback since Feb. 26, and the steepest drop since Nov. 11, 2022 when the won-dollar exchange rate fell 59.1 won.

The won’s appreciation was primarily led by the weak dollar, with the U.S. dollar index — a measure of its value relative to a basket of six foreign currencies — dropped to a six-month low following Washington’s tariff announcement.

“The won has been somewhat isolated from the global trend of the weaker dollar, mainly due to U.S. tariff uncertainty, increased overseas investments and domestic political turmoil,” noted Kim Byeong-yeon, an NH Investment & Securities analyst.

“The Constitutional Court ruling resolved the domestic political uncertainty, therefore pushing the won-dollar exchange rate downward,” Kim said, adding that the stock market would likely reflect the stabilization of the foreign exchange situation.

Following the verdict, NH Investment & Securities revised its projected range of the Kospi movement for the year from the previous 2,250 to 2,850 released last year, to 2,380 to 2,850, moving up the bottom range.

Daishin Securities analyst Lee Kyung-min also projected that the resolution of internal uncertainty would reduce downward pressure on the stock market.

“Foreign capital inflows may improve, potentially pushing the Kospi upward,” said Lee. The analyst projected the bottom range at around 2,430, but also noted that the possibility of undershooting remains.

From left: Financial Services Commission Chairman Kim Byoung-hwan, Bank of Korea Gov. Rhee Chang-yong, Finance Minister Choi Sang-mok and Financial Supervisory Service Gov. Lee Bok-hyun pose for a photo during a meeting in Jung District, central Seoul, on April 4. [MINISTRY OF ECONOMY AND FINANCE]

Tariff uncertainty prevails

Business lobbies were quick to release statements almost immediately after the ruling, urging national unity against the surging tariff woes and worsening trade environment.

“The business community respects the Constitutional Court’s decision,” said the Korea Chamber of Commerce and Industry in a statement released Friday.

“Considering the grave situation the Korean economy faces today, we expect the country to move beyond social conflicts and confrontations to normalize government operations and continue our efforts for the economic recovery and livelihood stabilization.”

The government held a ministerial meeting on economic affairs later that afternoon, also emphasizing the need for a united front against Trump’s tariff threats.

While noting that the market remained relatively stable following the verdict, the Ministry of Economy and Finance said, “It is very crucial for a 10 trillion won supplementary budget to be passed at the National Assembly in April to address trade risks, enhance AI competitiveness and support small businesses,” in a release following the meeting.

Worse-than-expected U.S. tariffs are also likely to encourage the legislature to pass the supplementary budget, potentially pushing the won-dollar rate further down.

“With the political unrest dragged on for a while gone and the supplementary budget moving forward, stimulation measures driven by monetary and fiscal policies will further accelerate the won’s appreciation,” said Daishin Securities economist Lee Joo-won.

BY SHIN HA-NEE [[email protected]]