Credit: Public domain.
Political instability is bad for business, a lesson that the supposedly business-friendly Yoon Suk-yeol 윤석열 failed to internalize. In the four trading days after Yoon’s self-coup attempt on December 3, South Korea’s stock markets suffered a loss of more than KRW 120t (USD 84b). As international investors exited en masse, the USD-KRW exchange rate shot up to nearly KRW 1.45k per USD 1.
South Korean stocks had been experiencing a record loss in value even before Yoon’s declaration of martial law. KOSPI and KOSDAQ, South Korea’s two leading stock indices, ended in the negative for the month of November, extending their losing streak for the fifth consecutive month since July. The bear market streak is the longest since the 2008 global financial crisis. Even during the East Asian Financial Crisis of 1997-98, which devastated the South Korean economy, the two indices only declined for four months before bouncing back.
The losses on the KOSPI and KOSDAQ are particularly notable because, unlike the 2008 financial crisis, South Korea’s stock market is out of step with other major economies. Over the year to date as of December 2, the KOSPI is down by more than 7%; the KOSDAQ, by more than 21%. Meanwhile in the United States, the S&P 500 is up by more than 26% in the same time period, and the NASDAQ by more than 28%.
Stock markets in other export-oriented Asian countries have likewise done well. China’s Shanghai Composite Index is up by nearly 13% year to date, Japan’s Nikkei 225, by more than 14%. Even the Al-Quds index for the stock market of Palestine performed better than KOSDAQ, losing only around 19% over the same time period.
