Six-hour martial law, "Han Te Gu" goes down the drain?

At the beginning of this year, in order to improve the state of the South Korean stock market, South Korea began to promote "Han Te Gu," announcing a plan similar to Japan's "Corporate Value Enhancement Plan," aimed at supporting shareholder returns through incentive measures including tax benefits.

After the six-hour emergency curfew turmoil on the evening of December 3rd, has "Han Te Gu" come to an end?

On December 4th, Nomura researchers Cindy Park, Siwoo Kim, and Chetan Set released a new research report stating that political risk has been factored into the capital market, but the South Korean stock market's reaction to the curfew turmoil was milder than expected. Considering that ongoing political uncertainty will weigh on the domestic economy, especially in the consumption and construction investment sectors, it is expected that the undervaluation of the South Korean stock market may persist.

The report further analyzes that in the short term, the stock market may be influenced by the political situation, while in the medium to long term, due to the weak political foundation of the ruling party and President Yoon Suk-yeol, the possibility of amending the Commercial Law (driven by the opposition party) and abolishing the short-selling ban may be amplified.

According to reports, South Korea's largest opposition party, the Democratic Party of Korea, has proposed to advance the Commercial Law amendment, demanding the strengthening of shareholder loyalty obligations. South Korea's financial regulatory agency responded on Monday, stating that it would cooperate with the ruling party to propose a Commercial Law amendment this week aimed at better protecting minority shareholder rights.

What impact did the impeachment of South Korean presidents have on the stock market historically?

According to Yonhap News' latest report on December 4th, South Korea's largest opposition party, the Democratic Party of Korea, urged Yoon Suk-yeol to resign immediately, stating that if he does not resign immediately, they will advance the impeachment process.

The report indicates that if the impeachment process continues, the market impact can be referenced from the impeachment case of former South Korean President Park Geun-hye.

During the impeachment of former President Park Geun-hye from June to December 2016, the South Korean KOSPI index fell by a cumulative 2.4%, but unexpectedly rebounded after December, with overall performance relatively mild during 2016-2017, and the KOSPI index standing above 2000 points.

By industry, from June to December 2016, the IT industry performed the best, recording an increase of 18.1%, while the shipbuilding and materials industries also performed well; the aerospace and defense industry performed the worst, recording a decrease of 24.1%. Public utilities and consumer goods also showed weak performance.

By company, the stock prices of Korea Financial Group and KB Financial Group rose by 28.1% and 27.6%, respectively, while Samsung Electronics and SK Hynix rose by 27.6% and 20.8%, respectively.

Nomura believes that the unexpected rebound of the Korean stock market in December is due to multiple factors, partly because of a stabilizing political outlook, a positive technology sector, and a favorable macroeconomic environment.

The report summarizes that although history does not predict the future, the stock market trends of 2016-2017 indicate that once the noise dissipates, the stock market may begin to reflect the fundamentals of companies and the macroeconomic environment.

In this context, Nomura expects that companies driven by high-end products will remain resilient. Industries such as memory, automotive, defense, and electrical equipment are expected to maintain resilience in 2025, while sectors less affected by potential U.S. trade policies (such as consumer and healthcare) may become attractive investment areas