South Korean markets ended Monday on a mixed note following the impeachment of President Yoon Suk Yeol over the weekend. The political upheaval, triggered by Yoon’s controversial declaration of martial law earlier this month, has left investors assessing the country’s economic and political landscape.
Market Performance
The blue-chip Kospi index initially rose during Monday’s session but reversed gains, closing 0.22% lower. Meanwhile, the Kosdaq, a small-cap index, ended 0.69% higher, marking its fifth consecutive day of gains.
Despite the volatility, both indices have shown resilience:
- The Kospi has climbed about 6% since hitting its lowest level in over a year on December 9.
- The Kosdaq has surged by approximately 11% in the same period, reflecting robust investor sentiment in smaller-cap stocks.
Yoon’s Impeachment: A Political Shockwave
On Saturday, South Korea’s National Assembly passed a motion to impeach President Yoon Suk Yeol with 204 votes, surpassing the two-thirds majority required in the 300-seat legislature. The vote followed Yoon’s short-lived declaration of martial law on December 3, a move that sparked widespread political turmoil.
Yoon’s suspension from office has placed Prime Minister Han Duck-soo in the role of acting president. The impeachment proceedings now shift to the Constitutional Court, which has 180 days to confirm or reject Yoon’s removal. Should Yoon resign before the court’s decision, the impeachment case will be dismissed.
Market Response to Political Developments
The impeachment marks a turning point in a politically tumultuous month. The Kospi and Kosdaq had initially slumped following Yoon’s martial law declaration but rebounded strongly after the motion was rescinded.
Key Developments Since December 3:
- The Kospi has risen 2.2% from its pre-martial-law close.
- The Kosdaq has gained 1.1% over the same period, reflecting investor confidence in smaller, domestic-oriented businesses.
The initial impeachment vote on December 7 failed after lawmakers from Yoon’s ruling People’s Power Party (PPP) walked out of the chamber. However, PPP leader Han Dong-hoon reversed his support for Yoon last week, paving the way for Saturday’s successful vote.
On Monday, Han announced his resignation, citing internal divisions within the PPP.
Government Reassurances and Investor Sentiment
In response to the political uncertainty, South Korea’s finance ministry reassured markets of the economy’s stability, emphasizing that systemic risks remain under control. Acting President Han Duck-soo has also sought to ease tensions, holding a call with U.S. President Joe Biden on Sunday to affirm continuity in South Korea’s foreign and security policies.
The main opposition party has pledged not to pursue impeachment proceedings against Han for his involvement in the martial law declaration, signaling a willingness to collaborate with the acting government to stabilize the nation.
What’s Next?
According to a research note from Citibank, the Constitutional Court is expected to uphold Yoon’s impeachment by mid-March 2025. This decision would trigger a presidential election by early or mid-May, potentially reshaping South Korea’s political and economic trajectory.
Investors will closely monitor developments as lawmakers and officials work to reassure allies and maintain market stability in the coming months.
