Concerns over deepening 'Korea discount' over martial law crisis

Photo Source: Yonhap News

In the aftermath of the emergency martial law crisis, uncertainties surrounding the Korean economy and the undervaluation of the Korean stock market are being diagnosed by foreign financial industries.

Bloomberg News believes this could strengthen the so-called "Korea Discount" among investors, where the Korean stock market is undervalued than other markets.

In the aftermath of martial law, the authorities' attempts to be incorporated into the advanced stock index and improve chaebol's corporate control could weaken.

In addition, Taiwan, which has TSMC, the world's largest foundry (semiconductor consignment production) company, is already superior in the artificial intelligence (AI) boom, saying that Korea's relative attractiveness may weaken compared to its rival Taiwan.

Reuters also said the confusion caused by martial law gave the Korea discount a justification for strengthening, adding that the Korean stock index fell and the won fell to its lowest level in two years.

Until now, factors affecting the Korea discount have been cited as inter-Korean confrontation and opaque business management centered on chaebols, and recently, the sluggish economy and the U.S.-China conflict were also concerns.

In addition, martial law was added as a negative factor.

This year, the value of the won has fallen by 9% against the dollar, the KOSPI index has been missing by 7%, and foreign funds that have left the domestic stock market since August have exceeded $14 billion (about 19.7 trillion won).