(Bloomberg) — A rally in South Korea following the impeachment of President Yoon Suk Yeol proved to be short-lived on Monday, with stocks and the currency reversing early gains as focus quickly shifted away from politics and back to the economy.
Most Read from Bloomberg
The benchmark Kospi Index ended the day 0.2% lower, while the won was slightly weaker against the greenback. The moves erased a brief period of optimism after the opening bell: The Kospi had jumped as much as 0.9% in early trading, putting it on track to erase all of its losses since the martial law move, while the currency gained as much as 0.5% against the dollar.
Korea’s parliament voted over the weekend to impeach Yoon, who stunned investors on Dec. 3 by imposing — and quickly reversing — martial law. Although the ensuing political chaos has rocked markets in Korea, analysts in the country said investors had largely priced in the success of the impeachment vote.
“Nothing has changed fundamentally,“ said Cho Junkee, an analyst at SK Securities Co. “The market has already reflected the impeachment last week and the impeachment vote is not providing further upside as investors take profit,“ he said.
Instead, investors turned their focus back to the longer-term worries that have plagued Korean assets this year, particularly fears about how Donald Trump‘s threatened tariffs will impact the export-oriented economy.
“The issues that have weighed on the local stock market, such as Trump’s second presidency and a slowdown in the chip sector, have not been resolved so the uncertainties still linger,” said Park Jinho, head of equity investment at NH-Amundi Asset Management Co.
Korean regulators have tried to ease nerves. The central bank vowed on Sunday to stabilize financial markets, adding that it expected markets to become less volatile in the wake of the vote. On Monday, financial authorities repeated their pledge to continue monitoring the market for 24 hours, while the stock exchange said it will establish a committee to manage potential volatility.
BOJ in Focus
The won plunged against the dollar in the immediate aftermath of martial law. Policymakers responded quickly, vowing to mobilize all possible measures to stabilize markets, but the currency has remained fragile since then.
The won briefly dipped when a local newspaper reported that Yoon was considering reimposing martial law, and dropped again after the country’s parliament failed to pass an earlier impeachment bill.
