MW South Korea President Yoon impeached, finance ministry calls emergency meeting

By Clive McKeef

South Korea's markets in focus as Yoon impeachment triggers legal process

South Korea's parliament on Saturday voted to impeach President Yoon Suk Yeol over his short-lived martial law decree earlier this month, leaving the country politically paralysed until the Constitutional Court ratifies the move, while jubilant crowds celebrated the resilience of the country's resilient democracy.

The National Assembly passed the motion 204-85, the Associated Press and Reuters reported. Yoon's presidential powers and duties were subsequently suspended and Prime Minister Han Duck-soo, the country's No. 2 official, took over presidential powers on Saturday.

Han promised his utmost efforts to ensure stability after Yoon's impeachment. "I will give all my strength and efforts to stabilize the government," Han told reporters.

The Constitutional Court has up to 180 days to determine whether to dismiss Yoon as president or restore his powers. If he is removed, a national election to choose his successor must be held within 60 days.

It was the second National Assembly vote on Yoon's impeachment after ruling party lawmakers boycotted the first floor vote last Saturday. Some of Yoon's People Power Party lawmakers had since said they would vote for his impeachment as public protests intensified and his approval rating plummeted.

Yoon is the second conservative president in a row to be impeached in South Korea. Park Geun-hye was removed from office in 2017. The decision also marks the third time an impeachment motion has been approved by the nation's parliament.

South Korea's foreign Minister Cho Tae-yul met with US Ambassador Philip Goldberg on Saturday and said that Seoul's foreign policy, and its alliance with Washington, will stay the same under the acting president, Bloomberg reported.

In light of the political uncertainty, South Korea's Finance Ministry announced an emergency meeting of economic ministers for Sunday afternoon. Finance Minister Choi Sang-mok is set to discuss the potential economic and financial implications with Bank of Korea Governor Rhee Chang-yong and other senior officials.

The discussions are expected to focus on stabilizing markets and addressing concerns about economic volatility. Earlier, after the declaration of martial law on Dec. 3, South Korea's finance ministry said it was ready to deploy "unlimited" liquidity into financial markets after the Korean currency fell to multi-year lows.

South Korea's stock market, represented by the Kospi index KR:180721, has historically been sensitive to impeachment proceedings.

In the two prior cases, President Roh Moo-hyun in 2004 and President Park Geun-hye in 2016, the market showed different reactions, analysts noted.

In President Roh's case, the Kospi initially rebounded after the parliamentary vote but subsequently dropped more than 20% following the court's decision to overturn the impeachment. However, during President Park's impeachment, the market was initially volatile but rallied more than 20% in the six months after the impeachment was upheld.

A recent report by Goldman Sachs highlighted the volatility leading up to the parliamentary votes but emphasized the Kospi's eventual recovery in both cases. The current situation could follow a similar track, depending on the court's ruling and the policies of a new administration.

South Korea is heavily reliant on exports and foreign investment, so maintaining investor confidence during a period of uncertainty will be important.

Technology companies such as Samsung (KR:005930) and automakers like Hyundai (KR:005380) play a central role in South Korea's economy, which the International Monetary Fund forecasts will expand by 2.5% this year.

The political uncertainty this month sent Korean stocks lower, raising concerns over the democratic stability of Asia's fourth-largest economy, but analysts such as John Woods, chief investment officer at Lombard Odier, said that South Korea observers are now "looking through this crisis".

"This volatility around the political backdrop is something we need to consider very seriously. But certainly the broad value of [South] Korea as a proxy AI is something also that we can't overlook," Woods told CNBC this week.

South Korea's equity benchmark climbed on Friday, recovering most of the losses triggered by President Yoon Suk Yeol's failed bid to impose martial law. The Kospi Index KR:180721 closed 0.5% higher, gaining for a fourth day. The gauge briefly traded above the closing level of Dec. 3, when Yoon surprised the nation with his late-night announcement of martial law, before revoking it just hours later. However, the Kospi has lost about 7% this year.

According to data from the Korea Exchange, the Kospi has a price-to-book ratio of 0.86, while its price-to-earnings ratio stands at 13.65 as of Dec. 12. Both the metrics, which indicate how much the investors value the index, have declined from a year earlier.

The won was last trading lower at 1,435.45 against the U.S. dollar, its weakest level since October 2022, according to LSEG data.

-Clive McKeef

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December 14, 2024 09:30 ET (14:30 GMT)

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