[Inside Chodong] The Value-Up Program Kicked Away by the President

The government's ambitious value-up program to resolve the 'Korea Discount' (undervaluation of the Korean stock market) disappeared in just three trading days. The repercussions of President Yoon Seok-yeol's sudden declaration of martial law, who more than anyone else hoped for a revaluation of the domestic stock market, are expected to grow increasingly severe. Even individual investors who stayed in the domestic stock market trusting the government's value-up program are now more likely to leave for the U.S. stock market and the virtual asset market. President Yoon's resignation is urgent for the sake of market stability.

From the 4th to the 6th, in just three days, KB Financial Group and Shinhan Financial Group fell by 15.7% and 9.0%, respectively. About 36% of all listed stocks hit 52-week lows. According to the Korea Exchange, from the 4th to the 6th, 953 stocks in the KOSPI and KOSDAQ markets recorded intraday 52-week lows.

Since the martial law incident, foreigners have recorded a cumulative net sale of 1 trillion won in the domestic stock market. Foreigners mainly sold off KB Financial, Samsung Electronics, Shinhan Financial Group, Hyundai Motor, and others intensively. The Yeouido securities market expects volatility in the domestic stock market to continue for the time being. Jin-hyuk Kang, a researcher at Shinhan Investment Corp., analyzed, "Political risks such as the rapidly accelerating presidential impeachment situation will act as short-term downward factors," adding, "because there is a heavy watchful stance after panic selling mainly by foreigners."

Due to prolonged uncertainty over the impeachment situation, on the 9th, both the KOSPI and KOSDAQ markets in South Korea fell sharply, hitting their lowest points of the year, while the won-dollar exchange rate rose to the 1,430 won level. Employees are working in the dealing room at the Euljiro Hana Bank headquarters in Seoul. Photo by Heo Young-han

Individual investors who watched the domestic stock market last week cannot hide their frustration. It is as if they were stabbed in the back by the president they trusted. Since taking office, President Yoon has consistently shown interest in the domestic stock market. On January 2nd, he attended the '2024 Securities and Derivatives Market Opening Ceremony' held at the Korea Exchange Seoul building. Among sitting presidents, Yoon is the only one who has attended the market opening ceremony.

In his congratulatory speech, President Yoon promised, "During my term, I will boldly reform capital market regulations that do not meet global standards and resolve the 'Korea Discount' to the level of global stock markets."

In November last year, he also directly mentioned short selling. On November 14th, during a Cabinet meeting presided over at the Yongsan Presidential Office, President Yoon stated, "Short selling will be banned until fundamental improvement measures are made."

He also pointed out, "If the issue of illegal short selling is neglected, it will make it difficult to form fair prices in the stock market," adding, "It can lead to a decline in trust in the securities market and investor withdrawal." Short selling has not resumed even after a year.

Despite pouring out various policies to resolve the Korea Discount, the attractiveness of the domestic stock market fell back to the bottom starting at 10:30 p.m. on the 3rd. The prominent U.S. economic media Forbes reported that President Yoon's governance style is fueling the 'Korea Discount' controversy. On the 6th (local time), Forbes analyzed, "It showed that the opinions of investors claiming the Korea Discount are correct," and "The cost of the martial law incident will be borne collectively by 51 million people." Bloomberg News also evaluated that the 'value-up' effort to resolve the Korea Discount will be adversely affected.

Even looking only at the stock market, it cannot be denied that President Yoon's sudden actions caused enormous damage. Someone must take responsibility. However, the president said, "We will leave the political stability measures to our party," and is leaving the situation unattended. The longer the situation takes to be resolved, the greater the chaos will inevitably become.

This content was produced with the assistance of AI translation services.