[Click eStock] "Political Momentum Gap and Q4 Big Bath Concerns"

NH Investment & Securities analyzed on the 10th that the domestic stock market plunged the previous day due to growing concerns that political uncertainty in South Korea may persist.

The KOSPI and KOSDAQ indices fell by 2.78% and 5.19%, respectively, the day before.

Researcher Na Jeong-hwan of NH Investment & Securities explained, "After the presidential impeachment motion was rejected on the 7th due to a lack of quorum, concerns about ongoing domestic political uncertainty caused stock prices to decline," adding, "The opposition party announced that they would reintroduce the impeachment motion on the 11th to avoid the principle of 'ilsabujae' (one motion at a time)." He further noted, "If the ruling party continues to abstain from the impeachment vote, the domestic political uncertainty is likely to be prolonged."

Researcher Na analyzed, "Along with the political momentum vacuum, factors such as a big bath (large-scale loss recognition) by domestic companies in the fourth quarter and downward revisions of corporate earnings estimates for next year are putting upward pressure on the KRW-USD exchange rate," adding, "The domestic stock indices continue to show a weak trend."

He explained, "From the 4th to the 6th, amid the martial law issue, foreign investors responded with net sales of about 1 trillion KRW in the securities market," and "On the 9th, they made net purchases of 100 billion KRW." He added, "Institutional investors made net purchases of about 1.6 trillion KRW in the KOSPI market from the 4th to the 9th," noting, "Pension funds recorded net purchases of 842.3 billion KRW."

Researcher Na emphasized, "Since September, foreign investors have responded with net sales in the Korean stock market due to concerns over a tariff war from the election of U.S. President Donald Trump," and "The foreign ownership ratio in the securities market has declined to 31% from the peak of 35% in July."

He advised, "There is a high likelihood that political uncertainty will continue for the time being," and "Considering past impeachment cases, it is necessary to keep in mind that stock prices after impeachment issues tended to be linked to the global economic cycle." He also noted, "At the same time, it is important to be aware that political events such as the U.S. Federal Open Market Committee (FOMC), U.S. debt ceiling, and budget plans are scattered around the year-end and early next year," adding, "At the FOMC meeting on the 18th, there is a possibility that the scale of interest rate cuts for next year will be reduced."

Furthermore, he said, "Expectations for the value-up program have diminished," but expressed hope that "as stock prices fall, the dividend yield increases, which could enhance the attractiveness of dividend stocks."