South Korean stocks fell while the won pared overnight losses after President Yoon Suk Yeol briefly declared martial law amid a political tussle, before moving to rescind the decree just hours later.
The benchmark Kospi stocks gauge slid as much as 2% as shares of Samsung Electronics Co, South Korea’s largest company, slumped 3%. The won gained as much as 1.6% to 1,406.35 per dollar, erasing nearly all of its overnight drop.
Late Tuesday night, Yoon declared martial law in the nation for the first time in more than 40 years. The won and South Korea-related exchange-traded funds sharply weakened overnight, before paring losses on news that the parliament sought to lift the decree and financial authorities vowed to provide “unlimited liquidity” to markets as needed.
It’s “a short-term political disruption that may result in impeachment or removal from office, but not a fundamental change in political risk,” said Brendan McKenna, an emerging market economist and FX strategist at Wells Fargo Securities in New York. He suggested clients close bearish won bets or buy Korean assets.
Korean Stocks Have Tumbled Since Summer
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Yoon’s shocking order was a high-stakes move he claimed would prevent the opposition from trying to paralyze his administration amid a rift that’s now set to deepen markedly. The opposition has been trying to force its budget proposal through the National Assembly, while Yoon has vetoed a string of bills passed by the parliament, at times angering even his own party.
South Korea’s top financial regulator Kim Byoung-hwan said after an emergency meeting that authorities will take “all possible measures” to ensure the stability of markets. A 10 trillion won (US$7 billion) stock market stabilization fund is ready to be deployed immediately if needed, he said.
Bank of Korea’s monetary board, which unexpectedly cut the key interest rate last week, convened an extraordinary meeting starting at 9 am to discuss steps to shield the economy and markets.
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USD/KRW Has Erased Most of Its Overnight Gain | Spot spiked to highest since 2009 in NY after martial law was imposed
Korea’s stock market has been one of the world’s worst this year, with Donald Trump’s US election win worsening its prospects with his tariff threats. Regulators also have been stepping up efforts to erase the “Korea Discount” of the nation’s stocks amid concerns over corporate governance and perennially low valuations.
“Yoon’s political career appears to be nearing its end,” said Jung In Yun, chief executive at Fibonacci Asset Management Global. “We expect some volatility today. Short term, this will be a buy opportunity. Long-term, the Korea Discount problems will persist and act as a headwind for growth.”
