Shinhan Investment Corp Report
Political Risk Acts as a Short-Term Downside Factor
In the impeachment political situation, cautious approaches are advised for domestic industries where business continuity is uncertain or damage is expected due to weakened consumer sentiment.
Kang Jin-hyeok, a researcher at Shinhan Investment Corp., stated in a report released that day, "The US ISM Manufacturing Index surprise seemed to trigger a rebound in both markets, but the domestic political risk weighed heavily on the market," and analyzed, "The 13th declaration of martial law in constitutional history froze the investment sentiment of all investors."
He continued, "After the lifting of martial law, a backlash occurred, and discussions on presidential impeachment accelerated," adding, "The decline widened in government-led projects (Daewang Whale, nuclear power plants), G2G (defense industry), value-up sectors (finance, automobiles), and travel and airline stocks."
The Institute for Supply Management (ISM) announced that the November Services Purchasing Managers' Index (PMI) fell by 3.9 points to 52.1 compared to the previous month. Although it remained above the baseline of 50, which separates economic expansion from contraction, it fell short of market expectations (55.5). This marks the first decline in ISM's Services PMI since June.
Researcher Kang emphasized the need to pay attention to events affecting the domestic economy beyond political issues such as the scheduled vote on the presidential impeachment motion on the 7th. He noted, "It is necessary to watch whether additional stimulus measures will be announced at the China Central Economic Work Conference held annually in mid-December," and pointed out, "Earnings announcements from Oracle (9th) and Broadcom (12th) could continue to provide positive momentum for tech stocks."
Political risks are expected to act as short-term downward factors for the Korean stock market for the time being, as foreign investors are showing heavy selling followed by cautious observation. Kang advised, "After digesting short-term sell-offs, fundamentals become important, but the situation is challenging with downward revisions to KOSPI earnings estimates," and recommended, "In the impeachment political situation, a cautious approach is necessary for sectors where doubts about business continuity arise and for domestic industries expected to suffer from weakened consumer sentiment due to prolonged social unrest."
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