March 10, 2017 / 2:38 AM / 4 months ago

Instant View - South Korea's court upholds President Park's impeachment

8 Min Read

Supporters of South Korean President Park Geun-hye attend a protest before the Constitutional Court ruling on Park's impeachment near the Constitutional Court in Seoul, South Korea, March 10, 2017.Kim Hong-Ji

(Reuters) - South Korea's Constitutional Court upheld the impeachment of President Park Geun-hye on Friday, instantly removing her from office over a graft scandal involving big business that has gripped the country for months.

Key Points

- Park Geun-hye was impeached by parliament in December and stripped of her powers pending the court's ruling.

- Park becomes South Korea's first democratically elected leader to be forced from office. A presidential election will be held in 60 days, according to the constitution.

- Park, 65, has been accused of colluding with a friend, Choi Soon-sil, and a former presidential aide, both of whom have been on trial, to pressure big businesses to donate to two foundations set up to back her policy initiatives.

- She is also accused of soliciting bribes from the head of the Samsung Group for government favours including the backing of a merger of two Samsung affiliates in 2015 that was seen to support the succession of control over the country's largest "chaebol" conglomerate.

- Park has denied any wrongdoing.

Comments:

YOON YEO-SAM, FIXED-INCOME ANALYST, MIRAE ASSET DAEWOO SECURITIES, SEOUL:

"Now the uncertainties are gone, the finance ministry and other policy makers should think of fiscal policies to boost the economy. Today's ruling will calm the currency's movement. Bond yields will rise a bit but expected to calm as future policies come in to the market”.

John Delury, Professor, Yonsei University, Seoul:

"South Korea's political paralysis can now end, as the country will race into a snap election to choose a new leader. Given Park's spectacular demise and disarray among conservatives, the presidential contest in May is the liberals' to lose."

Trinh Nguyen, Senior Economist, Natixis, Hong Kong:

"Political paralysis has dragged down sentiment in South Korea. The impeachment paves way for a presidential election in 60 days. As the saga is coming to an end, markets will be relieved that South Korea finally can push forward to press ahead with electing new leadership. And the hope is that this will allow the country to have a new leader that can address long-standing challenges such as labour market reforms and escalated geopolitical tensions.

"In other words, we are now looking at a new president in H2 2017 versus having to wait until early 2018. This pushes forward the prospect of change and hopefully will turnaround the subdued sentiment dragging down domestic demand. We don't expect short-term changes to economic trajectory."

Krystal Tan, Asia Economist, Capital Economics, Singapore:

"The formal impeachment of Park and the installation of a new president should provide a boost to short-term growth prospects. A return to normality should help prop up sentiment, which has been badly damaged by the recent political scandal, and more importantly will help pave the way for a fiscal stimulus.

"That said, a sharp rebound is not on the cards. Growth is likely to be held back by a combination of high household debt, the ongoing restructuring of the shipbuilding industry, and mounting external headwinds."

SHIN YUL, PROFESSOR OF POLITICAL SCIENCE AT MYONGJI UNIVERSITY, SEOUL:

"The court's verdict highlighted a problem - what happens if power becomes excessively concentrated in the hands of a president. In that sense, not to repeat this kind of an unfortunate incident, it is necessary to change the current presidential system and come up with measures to prevent. So I think, much discussion is needed how to amend the constitution rather than who will become the next president."

"Social uncertainties could last for a while. Nevertheless, fortunately, judges ruled unanimously, and this could mitigate uncertainties to some extent."

"Although some conservative voters would accept the court's verdict as judges ruled unanimously and think President Park made a mistake, but they won't like handing over power to the liberals."

JAMES WOODS, GLOBAL INVESTMENT ANALYST AT RIVKIN SECURITIES, SINGAPORE:

"Overall I don’t think the result was unexpected. The market has been very aware that this was the likely outcome for some time and the market reaction following a brief spike has been muted. Moving forward we’ll now see an election within 60 days, adding more political risk this year including key elections in Europe. As a result we may see increased volatility in Korean equities until we have a clear indication of the front running candidate and what their policies mean for the economy. Once that starts to become clear, it is likely to boost investor confidence as policymakers can get back to focusing on improving the economy."

Ho Woei Chen, Economist, Uob, Singapore:

"It removes some of the uncertainties, but still within the next 60 days we're going to have a presidential election, so there's going to be some uncertainty on that as well. But the amount of uncertainty...has been reduced.

"So you can see that dollar/won has actually reacted (with a drop in the dollar) after the impeachment announcement and Kospi also was a bit higher.

"Based on some of these recent numbers that we are seeing, it seems like the exports are performing quite well... In the first half of this year there seems to be some positive momentum in terms of global demand translating into stronger exports numbers for South Korea.

"Domestically, I think all these removal of uncertainties will be positive on private consumption."

KIM MAN-HEUM, HEAD OF THE KOREA ACADEMY OF POLITICS AND LEADERSHIP, SEOUL:

“South Korea needs to fix its political system; checks and balances are needed to prevent abuse of power by irresponsible politicians. Constitutional amendments need to be considered to stop the President from abusing power, to prevent similar political events in the future.”

Kim Hyun-Su, Director, Ibk Asset Management, Seoul:

“Uncertainties will ease in the stock market. Things will be put in order and head in a positive direction. Even if major conglomerates get legal punishment, they will head in a more positive direction compared to the past now that some uncertainties have been partly removed.”

Robert Kelly, Professor, Busan National University, Seoul:

"Korea deserves great praise for how it handled this crisis. Every democracy has scandals and crises. Through the last 6 months, the Koreans handled this very well. They followed the constitutional provisions. The street protests were peaceful. No one got hurt; there was not property damage. This never became like Arab Spring. The Koreans just showed the world how a peaceful impeachment is completed. Not even the Americans have done that, as Nixon resigned before the process finished."

Park Jung-Hoon, Fund Manager, Hdc Asset Management, Seoul:

“Today’s ruling will help remove market uncertainty. Should the liberal party, which emphasises reform of conglomerates, take power, this will put pressure on heavyweight shares like Samsung Electronics.”  

ANDY JI, ASIAN CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SINGAPORE:

"The ruling was expected. At the same time, THAAD developments continue to escalate between South Korea and China, its largest trading partner. Even in politics, the uncertainty lingers as a new election is to be held."

"So it's a triple whammy for the KRW from here even with one small uncertainty eliminated. We still look for dollar/won to head higher to 1,200, helped also by firm U.S. dollar."

Market Reaction:

The Korea Composite Stock Price Index (KOSPI) .KS11 was up 0.2 percent to 2,091.48 points as of 0227 GMT.

The won KRW=KFTC stood at 1,159.6 against the dollar, down slightly compared with Thursday's close of 1,158.1. It briefly touched its lowest intraday level since Jan 31.

Reporting by James Pearson, Jeong-eun Lee, Dahee Kim, Hyunjoo Jin, Heekyong Yang, Jane Chung in SEOUL; Masayuki Kitano and Nichola Saminather in SINGAPORE

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