Korean stocks diverge: Winners, losers of Yoon’s martial law debacle

South Korean stocks showed clear divergences on Wednesday amid a mixed market outlook as President Yoon Suk Yeol’s martial law declaration, rejected by parliament, raised doubts about his political career as head of the country.

Analysts said that the domestic stock market would grapple with a triple whammy: a leadership vacuum, a slowdown in Asia's No. 4 economy and uncertainties surrounding Donald Trump's trade policies in his second term.

But some fund managers downplayed such concerns, noting the market is behind the worst of its political uncertainty and will bottom out soon, given its low valuation.

"Could there be more surprising news than (declaring) martial law?" said one asset management company head.

"We've experienced a president who was impeached. The stock market can digest uncertainties coming from a president's impeachment," he added, referring to former President Park Geun-hye, who was ousted in 2017.

Investors dumped energy stocks, once regarded as key beneficiaries of Yoon's ambitious energy policy, including reactivating nuclear power plants and drilling in the East Sea, believed to have massive oil and gas reserves.

Travel companies and casino operators were other victims of the martial law debacle, which could dampen foreign tourism demand.

Grand Korea Leisure Co., a foreigners-only casino operator, tumbled 6.22% to close at 11,310 won.

The main opposition Democratic Party is urging Yoon to resign to take responsibility for the martial law declaration. Otherwise, it has vowed to file a motion to impeach him.

Lawmakers and some constitutionalists say Yoon’s martial law decree lacked the proper process stipulated by the national constitution and failed to meet the conditions for such an emergency act.

Doosan Enerbility Co., a nuclear power plant builder, lost 10.17% to end at 19,000 won, its lowest point in almost two months.

Korea Gas Corp. (KOGAS) nosedived by 18.75% to close at 33,150 won, a six-month low. POSCO International Corp. plunged by 12.62% to finish at 40,500 won, its lowest point since late June 2023.

Both KOGAS and POSCO will be involved in South Korea's oil gas exploration project after President Yoon said in June that the country had found potentially massive reserves of oil and gas in the East Sea.

KAKAO GROUP SHARES RALLY

In contrast, companies highly exposed to political risks such as mobile platform Kakao Corp. rallied against the steady broader market on the prospect of Yoon's impeachment.

Kakao notched up an 8.50% gain to close at 46,600 won. The share price of fintech platform Kakao Pay skyrocketed 22.49% to end at 32,950 won. They hit their strongest finish in more than six months.

The mobile platform group has been under regulatory and antitrust probes. Late last year, President Yoon singled out Kakao as a company with a moral hazard concerning the business practices of Kakao Mobility Corp., the country's largest taxi-hailing app.

SPECULATIVE TRADE

"If the impeachment process begins, the stock market will likely retreat and lose direction," said another fund manager. "Speculative funds will flow into politically themed stocks until a new president is elected." 

However, some analysts expect the Kospi index to find downside support at 2,400.

The country’s benchmark stock index Kospi ended down 1.4% at 2,464.00 on Wednesday in the most active trade since Aug.5, when the domestic stock market sank. The junior market Kosdaq closed 2% lower at 677.15.

To calm investors, the Bank of Korea said it will provide ample liquidity to the country’s financial markets by purchasing repurchase agreements, or repos.

By Han-Shin Park, Eun-Hyuk Ryu and

phs@hanhyung.com 


Yeonhee Kim edited this article.