Stock market rebounds amid political uncertainty

Stock market rebounds amid political uncertainty. December. 11, 2024 07:41. by 이동훈기자 dhlee@donga.com.
The stock market has been on a roller coaster ride, staging a sharp recovery on Tuesday after a steep decline on Monday. Although the market has rebounded in five days since the imposition of martial law, unresolved political unrest continues to cast a shadow, and analysts caution that the market may remain on a “slippery slope” for the foreseeable future. The government has pledged to “do its utmost” to stabilize the market, warning against excessive volatility in the domestic stock market.

On Tuesday, the KOSPI closed at 2,417.84, up 2.43% from the previous session, with institutions—including pension funds—buying heavily and offsetting most of the previous day’s losses. The KOSDAQ also surged 5.52%, reclaiming the 660 mark. Meanwhile, the Korean won-dollar exchange rate, which had been climbing in recent days due to concerns over the country’s political credibility, eased to 1,426.9 won, down 10.1 won from the previous day.

The rebound follows four consecutive days of market declines triggered by President Yoon Suk Yeol’s declaration of martial law on Tuesday night. Bargain hunters stepped in, encouraged by the belief that the selloff had been overdone due to the political turmoil. Optimism surrounding potential economic stimulus measures in China further bolstered investor sentiment.

“The anxiety that spread after the state of emergency is gradually subsiding, with foreign investors heavily purchasing KOSPI futures,” said Lee Kyung-min, a researcher at Daeshin Securities, predicting that the KOSPI could return to the 2,600 mark by year-end. Shin Seung-jin, head of investment information at Samsung Securities, echoed this sentiment, stating, “It seems the market is rebounding as most of the bad news has already been priced in.”

However, some analysts remain cautious, warning that the market’s recovery may be short-lived given lingering political uncertainties, including the possibility of impeachment proceedings and a lack of effective measures to address South Korea’s sluggish economy. “While political resolution could drive a short-term rebound, we must remain mindful of the downward trend in exports and corporate profitability over the longer term,” said Seo Sang-young, a researcher at Mirae Asset Securities. Retail investors, for their part, remained cautious, selling a net 400 billion won in KOSPI stocks on Tuesday.