KOSPI Recovers to 2500 After Impeachment Passed... Experts Say "Stock Market Rally Will Continue"

KOSPI and KOSDAQ Start Higher
Recover 2500 Level After 10 Trading Days
Year-End Recovery to 2600 Level Also Expected

The domestic stock market is expected to stabilize following the parliamentary approval of the presidential impeachment motion. This outlook is based on the judgment that investment sentiment, which had been suppressed due to political uncertainty, will revive as the uncertainty eases somewhat. However, concerns were also raised that ongoing risk factors such as the continued weakness of the Korean won could limit the domestic stock market's rebound.

On the 13th, one day before the impeachment vote, the domestic stock market, which had been rising for three consecutive days, started with a slight decline. The KOSPI began at 2,473.75 points, down 5.62 points, fluctuating slightly up and down while maintaining a steady trend, and the KOSDAQ rose slightly. The won-dollar exchange rate also fluctuated slightly up and down, remaining in the 1,430 won range. Stock prices, exchange rates, and other indices are displayed in the dealing room of the Euljiro Hana Bank headquarters in Seoul. Photo by Heo Young-han

In response to the parliamentary passage of the impeachment motion, both the KOSPI and KOSDAQ started higher on the 16th. As of 9:11 a.m. that day, the KOSPI recorded 2,513.18, up 18.72 points (0.75%) from the previous session, regaining the 2,500 level. It was the first time in 10 trading days since the 3rd that the KOSPI reached the 2,500 mark. The KOSPI opened at 2,511.08, up 0.67% from the previous close, fluctuating around the 2,510 level in early trading. At the same time, the KOSDAQ rose 6.56 points (0.95%) to 700.29, returning above the 700 level. The KOSDAQ opened at 699.91 and has been trading above 700 since then. This is the first time since the 13th of last month (closing price basis, 710.52) that the KOSDAQ has traded above 700.

KOSPI: Sufficient Price Adjustment... Respond with Buying if Attempting to Settle Above 2,500

Experts expect the stock market to continue its rebound as the first hurdle of impeachment has been cleared, alleviating some uncertainty.

Lee Kyung-min, a researcher at Daishin Securities, noted that the KOSPI had shown differentiated weakness due to domestic demand instability, lack of internal momentum, and added political uncertainty. However, once political uncertainty clearly eases, the previously suppressed KOSPI reversal is expected to become more pronounced. He said, "Especially by confirming real economy indicators such as retail sales and industrial production in China (on the 16th) and the U.S. (on the 17th), we can reaffirm the still robust U.S. economy along with China's economic recovery." He added, "After the U.S. Federal Open Market Committee (FOMC) meeting on the 19th regarding December, there is a high possibility that market relief regarding the U.S. interest rate cut cycle will flow in, and furthermore, the seasonal supply and demand in December (foreign futures buying, institutional program buying) will continue and strengthen until the end of the year." For these reasons, he recommended responding with buying even if there are short-term fluctuations during the KOSPI's attempt to break through or settle above 2,500.

Park Seok-jung, a researcher at Shinhan Investment Corp., predicted, "It will be difficult for political uncertainty to be completely resolved before the Constitutional Court ruling, but at least the possibility of easing is high." He added, "Loss of national momentum, social chaos, and the spread of protests may negatively affect investment sentiment in consumer and existing leading stocks, but the disappearance of additional martial law possibilities and the easing of political risks will increase the attractiveness of lowered valuations." He further stated, "A rapid recovery is expected after the Constitutional Court ruling."

Yang Hae-jung, a researcher at DS Investment & Securities, also said, "Momentum needs to be observed further, but foreigners may start buying just by the value trigger being activated once political risks are cleared." He analyzed, "If foreign buying resumes, there could be a selling gap in the KOSPI."

Kim Dae-jun, a researcher at Korea Investment & Securities, also viewed that political uncertainty, which had pressured the stock market over the past two weeks, would ease. He explained, "This is because the system of the Republic of Korea, which had temporarily stopped due to the parliamentary passage of the presidential impeachment motion, will start working again." He added, "Of course, the market had already reflected some expectations before this. The VKOSPI, which shows KOSPI volatility, has been slowly declining since December 9, and the credit default swap (CDS) premium showed limited increases, supporting this."

Experts advised focusing on sectors that experienced significant declines this year but are expected to see net profit growth next year. Lee Jae-man, a researcher at Hana Securities, said, "Considering the expectation of a U.S. Federal Reserve (Fed) rate cut on the 18th, the domestic stock market is expected to rebound centered on sectors that had excessive annual declines but are expected to increase net profits in 2025." He added, "Semiconductors, banks, software, IT hardware, and defense correspond to these sectors."

Jo Jun-gi, a researcher at SK Securities, said, "Excluding the non-ferrous metals sector, which experienced declines due to the Korea Zinc issue, sectors with excessive declines include banks, insurance, telecommunication services, hotels and leisure, securities, machinery, and trading and capital goods." Conversely, he noted, "Sectors with strong short-term price momentum include IT hardware, shipbuilding, semiconductors, cosmetics and apparel, software, healthcare, and media and education."

KOSPI Expected to Recover to 2,600... Exchange Rate Rise is a Burden

Some experts expect the KOSPI to recover to the 2,600 level, which was the level at the beginning of the year, by the end of this year. They believe that political uncertainty factors after the martial law incident have already been reflected in the stock market, and considering that the Morgan Stanley Capital International (MSCI) Korea index, an international benchmark, has fallen 26% from its yearly high during this impeachment process, there is room for further domestic stock market rebound.

Researcher Lee Jae-man said, "The MSCI Korea index in U.S. dollar terms fell 26% from its yearly high in 2024. Considering that, except for past phases such as the global financial crisis, advanced country fiscal crises, the COVID-19 pandemic, and the Fed rate hike phase, the index fell at least 13% and up to 27% from its peak, price adjustment has sufficiently progressed." This implies that there is room for further price increases due to the significant price drop. Accordingly, Lee predicted that the KOSPI could recover to the 2,600 level, the level at the beginning of the year.

Kim Sang-hoon, a researcher at KB Securities, forecasted, "Although a rally may be difficult, if uncertainty is resolved, the market will stabilize and is likely to move toward the original level of 2,600."

Lee Hwa-jin, a researcher at Hyundai Motor Securities, said, "The VKOSPI, the KOSPI 200 volatility index, has also been rapidly normalizing, and as a result, both stock markets have succeeded in recovering to the level before the announcement of martial law." He added, "Since the index had already rebounded preemptively despite the impeachment uncertainty being resolved, a range of 2,400 to 2,600 is expected." Furthermore, Lee interpreted that although foreigners were net sellers of the KOSPI, △ the intensity was not high, and △ during the same period, KOSPI futures were net bought, indicating positive aspects from a supply-demand perspective.

However, there is also an opinion that the stock market rebound may not be large since the impeachment issue has already been reflected in the market. Jo Jun-sik, a researcher at SK Securities, said, "Both the KOSPI and KOSDAQ have already recovered most of their declines, and the news of the impeachment vote approval over the weekend met consensus, so uncertainty is interpreted as further reduced." He concluded, "This result does not mean the stock market itself should be viewed negatively, and it can act as additional momentum for stock market rises due to relief, but it is somewhat ambiguous to expect a very large price reaction."

There is also a forecast that as the impeachment political situation enters its final phase and time passes, the stock market will show a flow synchronized with global trends. In this regard, attention should be paid to the Fed's regular FOMC meeting scheduled for the 17th-18th. Wall Street has already factored in a rate cut by the Fed at this meeting. Lee Hwa-jin said, "For now, the impeachment political influence phase continues, but as in past cases, over time, the stock market flow is expected to synchronize with global trends." He suggested, "In that respect, issues such as the U.S. FOMC (early morning of the 19th), Bank of Japan (BOJ) Monetary Policy Meeting (morning of the 19th), and Micron earnings (morning of the 19th) should also be monitored."

Kim Ji-won, a researcher at KB Securities, explained, "This week, major countries' monetary policy meetings including the FOMC, Bank of England (BOE), and BOJ are scheduled." He added, "Several indicators such as the U.S. Personal Consumption Expenditures (PCE) price index and Gross Domestic Product (GDP) are also pending." He further noted, "It is necessary to watch whether Broadcom's strong earnings will lead to a semiconductor stock rally in the domestic market, and Micron's earnings on the 19th are also important." He evaluated, "Political risk has somewhat eased, so an upward trend is expected to continue, but domestic and external risk factors remain, so volatility may expand again."

Meanwhile, even if the stock market rebound continues, the recent rising pressure on the won-dollar exchange rate is expected to weigh on the market. As the won continues to weaken, foreigners concerned about exchange losses are withdrawing from the domestic stock market. Foreigners net sold 914.6 billion won in the securities market from the 1st to the 13th of this month. Kim Sung-no, a researcher at BNK Investment & Securities, said, "After the martial law incident, national credit rating, won-dollar exchange rate, and the possibility of foreign withdrawal are negative factors." He added, "The won-dollar exchange rate is expected to be influenced by the speed of U.S. rate cuts, but since foreigners continue to sell in the stock market, it is likely to remain in the 1,400 won range for the time being."

Ultimately, experts agree that political normalization must be achieved quickly to prevent the negative effects from spilling over into the economy. Lee Hwa-jin said, "Although the impeachment has been approved, uncertainty remains, so the ruling and political normalization must proceed as soon as possible to minimize economic shocks." He expressed concern, "In the coming months, the political situation is likely to negatively affect the recovery of consumption and investment sentiment among economic agents, making it inevitable that downside risks to the economy will expand."