South Korea's QE is 'almost certainly off the table'
DreamWorks
The conservative Saenuri party failed to keep its slim parliamentary majority in in Wednesday's election. It won 122 out of 300 seats while Minjoo, the main opposition party, won 123, according to Yonhap.
The Saenuri party is now the first South Korean governing party in 16 years without a parliamentary majority, according to the New York Times.
The parliamentary elections "represent a major blow to the authority of President Park Guen-hye and further reduce the likelihood of the reforms needed to address the country's growing structural problems," wrote Capital Economics' Gareth Leather and Krystal Tan in a note to clients.
"The results of the parliamentary election leave little room for optimism," they added.
And, notably, "the Saenuri's controversial proposal of the so-called 'Korean QE' program is now almost certainly off the table," wrote Bank of America Merrill Lynch's Korea economist Jaejoon Woo in a note to clients.
Back in 2012, Park was originally elected on promises to refurbish the Korean economy and to boost GDP growth up to 4%, according to figures cited by Capital Economics. However, she hasn't made a lot of progress during her tenure.
Part of this can be attributed to the fact that the Korean constitution requires the support of 60% MPs for a bill to become law, but in the last parliamentary elections the ruling party won less than 60% of the seats.
As such, Park was hoping that the latest elections might help her reform efforts. But, as noted above, that did not pan out as planned.
Capital Economics
"This would be a problem anywhere, but given the structural problems facing Korea, including rising debt levels, inflexible labor laws, and underperforming services sector and a rapidly aging population, this is especially worrying."
BAML's Woo expressed similar concerns in his research:
"One likely scenario is the status quo with political gridlock as it was in the last three years, without producing any major breakthroughs in terms of policy initiatives," he wrote.
"In this fragmented political landscape, lack of clarity on the direction of policy changes will likely increase the uncertainty further for the time being amid weak recovery and uncertain global growth outlook," he added.
The Korean won ended Thursday's session weaker by 0.6% at 1,152.84 per dollar.
- I quit McKinsey after 1.5 years. I was making over $200k but my mental health was shattered.
- Some Tesla factory workers realized they were laid off when security scanned their badges and sent them back on shuttles, sources say
- I tutor the children of some of Dubai's richest people. One of them paid me $3,000 to do his homework.
- Why are so many elite coaches moving to Western countries?
- Global GDP to face a 19% decline by 2050 due to climate change, study projects
- 5 things to keep in mind before taking a personal loan
- Markets face heavy fluctuations; settle lower taking downtrend to 4th day
- Move over Bollywood, audio shows are starting to enter the coveted ‘100 Crores Club’