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By Yoon Ja-young
The Constitutional Court's decision to uphold the National Assembly's impeachment of former President Park Geun-hye boosted the stock market by getting rid of political uncertainties.
The main index KOSPI once reached 2,102.05 points in the morning session, right after the announcement by the court to uphold the impeachment. It stabilized in the later session, closing at 2,097.35 points, up 0.3 percent from the previous day. The junior, tech-heavy KOSDAQ also gained 6.13 points, closing at 612.26.
Analysts said that the disappearance of uncertainties is the positive factor on investor sentiment.
Kim Yong-gu, an analyst at Hana Financial Investment, said that the market would make a turnaround when a few conditions are met, citing the case of Brazil back in 2015 when its president Dilma Rousseff was impeached.
"There should be stabilization of the political turmoil, and the launch of a new administration and the suggestion of policies should follow soon. There should also be expectations of policies such as the economic stimulus plans," the analyst said.
He said that expectations of economic policies of new administration will materialize following the presidential election, which will take place within 60 days.
Also, there are shares that will benefit more than others.
"The court's decision is likely to increase investors' expectations that a candidate from the opposition parties will win the next presidency. Note that they are deemed to be relatively on better terms with China."
It means Korea's related B2C consumer goods that were battered by China's economic retaliation following Korea's decision to adopt the United States' Terminal High Altitude Area Defense (THAAD) may seek opportunities for recovery, according to the analyst. Cosmetics, food and beverages, retail and media stocks were hit the hardest.
Analysts, however, stress that the Court's decision will not have a long-term impact.
"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," said Steffen Dyck, senior credit officer of Moody's Investors Service.
"However, upside risks to our growth forecast of 2.5 percent for 2017 are limited given other domestic and external headwinds such as high household debt, corporate restructuring, growing tensions with China over THAAD, and uncertainties over how the U.S. administration's trade policies will affect Korea."
Kim Sung-hwan, an analyst at Bookook Securities, also said that political events do not have meaningful impact on the mid to long term.
"External and internal economic situations determine the direction of the stock market instead of political events," the analyst noted, citing the United States' Federal Open Market Committee (FOMC) in March, the direction of Korea's exports and improvement in corporate performance as major issues.
Kim at Hana Financial Investment also warned investors to avoid so-called politician-themed stocks, or those rendered to be related with potential presidential candidates.
"The last days of political themed stocks have always been dismal. They should never be considered as an investment option," he said.
EG, a KOSDAQ listed firm headed by former President Park's younger brother, plummeted by 14.19 percent Friday.
Shares deemed to be related with Moon Jae-in, a frontrunner presidential candidate from the main opposition Democratic Party, meanwhile, have been fluctuating. DSR rose to its daily limits on Thursday, continuing rising 1.39 percent the next day. DSR Steel, which is also deemed as Moon Jae-in themed stock, however, dropped 8.72 percent Friday following a rise the previous day.
