Financial market unfazed by presidential impeachment

SEOUL, March 10 (Yonhap) — South Korea’s financial market remained calm Friday despite the court’s unprecedented ruling to impeach the country’s president.

The widely anticipated verdict cleared some political uncertainties and the authorities cited the resilience and financial health of the major Asian economy on top of its proven ability to ride out harsh predicaments.

“There is no need for domestic and foreign investors, as well as workers in the financial circles, to have any anxiety about our financial market,” said Yim Jong-yong, chairman of the Financial Services Commission (FSC). “There will be no crisis. Even so, (we) are fully prepared to counter any contingencies.”

He was presiding over an emergency meeting of senior FSC officials shortly after the Constitutional Court’s decision to uphold the National Assembly’s impeachment of Park Geun-hye over her abuse of power and involvement in a bribery scandal. It took effect immediately, cutting short her tenure by nearly a year.

Yim pointed out that the authorities have been already operating a 24-hour emergency situation room to closely monitor financial market situations at home and abroad.

In fact, the local financial market showed it’s tough to rattle.

The benchmark index, the KOSPI, gained 6.29 points, or 0.30 percent, to close at 2,097.35. The local currency finished the day’s trade at 1,157.40 against the U.S. dollar, up 0.7 won from the previous session.

The head of the state financial watchdog noted the stability of the market.

“As the financial market has shown a stable trend recently, it’s important to cope with the situation in a clam and cool-headed manner,” said Zhin Woong-seop, governor of the Financial Supervisory Service (FSS).

But he emphasized the importance of “thorough risk management,” saying swings in the market may expand amid a power vacuum to last until the presidential elections likely to be held in early May.

Other challenges facing Asia’s fourth-biggest economy include the pace of the U.S. interest rate increases, China’s business retaliation for the deployment of an advanced U.S. missile defense system on its soil and North Korea’s provocations.

The FSS had a separate meeting with vice presidents of 15 major banks here, which are in charge of foreign exchange operations.

Finance Minister Yoo Il-ho also convened a meeting to touch on the macroeconomic policy situation later in the day.

Bank of Korea Gov. Lee Ju-yeol and other top central bank officials reviewed the stability of the financial market in an internal meeting.

The finance ministry is scheduled to hold a senior-level financial policy meeting Saturday, followed by a economy-related ministers’ session Sunday, in a show of the government’s determination to thoroughly manage the situation.

Market watchers predicted the ruling will help resolve a monthslong political turmoil here, as investors are paying keen attention to the Federal Reserve’s rate decision slated for next week and other external events.

“The conclusion of the impeachment process removes one important element of political uncertainty, allowing a new president to come in and focus on formulating reforms that address Korea’s structural challenges,” Moody’s Investors Service said in a statement.

However, upside risks to the current growth forecast of 2.5 percent for this year are limited given other domestic and external headwinds such as high household debt, corporate restructuring, growing tensions with China over the military issue, and uncertainties over how the U.S. administration’s trade policies will affect South Korea, added the global credit rating agency.

Analysts here also stuck a generally upbeat outlook.

“With the Constitutional Court’s ruling, some political uncertainties have been cleared,” said Yoon Young-kyo, an analyst at Cape Investment & Securities. “That’s a positive for the market, but its impact may not be great on the market.”

New economy-boosting measures, if taken, by the incoming government may positively affect the local stock market, added Yoon.

An election to pick Park’s successor must be held within 60 days and many expect it to fall on May 9. The winner will immediately take office without a transition period.

“Market expectations may run high over economy-boosting policies by the new government,” said Kim Yong-koo, an analyst at Hana Investment & Securities.

 

 

 

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