S Korea bourse extends fall as political woes deepen; petrochemical shares slump

SINGAPORE (ICIS)–South Korea’s benchmark stock market index continued to bleed on Monday amid political instability wrought by the shock martial law announcement on 3 December, with impeachment motions against President Yoon Suk Yeol dropped over the weekend due to lack of quorum.

• KOSPI composite index falls for fourth session
• Petrochemical shares tumble along; Nov exports fall 5.6% year on year
• Yoon may be stripped of presidential powers

At the close of trade on Monday, the KOSPI composite index shed 67.58 points or 2.78% at 2,360.58, with shares of major petrochemical companies slumping.

The Korean won also weakened sharply against the US dollar. The pair was trading W1,437.27 as of 07:04 GMT.

When martial law was declared late on 3 December, the won tumbled to a near two-year low above W1,440 levels versus the greenback.

PETROCHEMICAL EXPORTS FALLING
South Korea is a major exporter of ethylene, as well as aromatics, such as benzene, toluene and styrene monomer (SM).

The overall industry is reeling from a combination of weak external demand and overcapacity in China.

South Korean industries, including chemicals, rely heavily on exports to China, whose self-sufficiency has grown over the years.

In November, South Korea’s petrochemical exports declined by 5.6% year on year to $3.6 billion. In the first 11 months of 2024, however, its petrochemical export volume increased by 7.5% year on year, the Ministry of Trade, Industry and Energy (MOTIE) said on 5 December.

Market players said that port operations in Daesan have been unsteady because of strong winds, causing delays in cargo deliveries.

“Petrochemical exports are facing difficulties due to unforeseen factors such as falling product prices linked to oil prices and bad weather,” the first vice minister of MOTIE Park Sung-taek said after a recent visit to the refinery of Hyundai OIlbank and the production/export site of Hyundai Chemical.

For Hyundai Oilbank, the arrival of five carriers and three crude oil import vessels were delayed because of inclement weather in late November, while delays also hit shipment of five product carriers of Hyundai Chemical, MOTIE noted.

“In order to prevent disruptions in exports, we will diversify the types of oil reserves from the existing heavy crude oil to light crude oil in consideration of the types of oil used by each refinery, and greatly simplify the oil reserve lending process so that companies can quickly provide oil reserves when necessary,” Park said.

EMERGENCY MEETINGS OF FINANCIAL REGULATORS CONTINUE
The economic managers of Asia’s fourth-largest economy – led by Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok – have been holding daily emergency meetings before markets open to ensure financial markets stability, keeping their promise to provide “unlimited liquidity”.

“The participants agreed that, as domestic and international uncertainties still persist, relevant organizations should maintain a closer emergency cooperation and response system and mobilize all capabilities to respond in order to minimize the economic impact of the political situation.

In a statement on Monday, the Ministry of Economy and Finance said that “as domestic and international uncertainties still persist, relevant organizations should maintain a closer emergency cooperation and response system and mobilize all capabilities to respond in order to minimize the economic impact of the political situation”.

South Korea intends to activate a market stabilization fund worth won (W) 40 trillion ($28 billion) following the country’s brief dalliance with martial law, with its slowing economy facing the prospect of increased US tariffs in 2025.

For the stock market, the MOEF said that W30 billion of the value-up fund “has already been invested”, with W70 billion to be injected this week, with another W30 billion scheduled to be implemented sequentially.

YOON SURVIVES IMPEACHMENT BUT MAY BE STRIPPED OF POWERS
Because of lack of quorum, South Korean President Yoon managed to survive impeachment on 7 December, which was set into motion following his declaration of a six-hour long martial law that disrupted markets.

“The impeachment vote failed to gain the 200-vote hurdle needed to suspend the president from duties,” Singapore-based UOB Global Economics & Markets Research said in a note on Monday.

“The opposition bloc needed only eight votes from the ruling PPP [People Power Party] to impeach Yoon as votes by three PPP members had prompted protesters outside the National Assembly to chant “five more to go,” it said.

On 8 December, PPP leader Han Dong-hoon said that Prime Minister Han Duck-soo will manage the nation’s affairs as an exit plan for Yoon is being prepared, the constitutionality of which is being questioned by the opposition Democratic Party of Korea (DPK).

Focus article by Pearl Bantillo

Additional reporting by Jonathan Yee

Thumbnail image: Lawmakers in the voting chamber during the plenary session for the impeachment vote of President Yoon Suk Yeol at the National Assembly in Seoul, South Korea on 7 December 2024.(JEON HEON-KYUN/POOL/EPA-EFE/Shutterstock)