In brief
Investors and analysts are on high alert as political turmoil in South Korea leads to a significant decline in stock prices and currency value, triggering emergency meetings among officials.
South Korea's financial markets are facing turbulent times as stocks and its currency took a hit amid a brief declaration of martial law by President Yoon Suk Yeol on December 3, 2024. The benchmark Kospi index dropped approximately 2 percent in early trading in Seoul, with major corporations like Samsung Electronics, LG Energy Solution, and Hyundai Motor experiencing declines of over 1 and 2 percent, respectively.The South Korean won, which suffered a steep drop following the martial law announcement late Tuesday night, managed to stabilize slightly, trading down by about 1 percent against the dollar by Wednesday morning. In response to the crisis, Finance Minister Choi Sang-mok organized meetings with central bank officials and financial regulators, pledging to implement daily risk management strategies and provide "unlimited liquidity support" to stabilize the markets.Choi reassured the public, stating the government would prioritize economic protection and maintain communication with other major economies. In a bid to address the heightened economic uncertainties, the Bank of Korea's monetary policy board announced an emergency meeting and last week cut interest rates unexpectedly.As tensions rise, opposition lawmakers are calling for President Yoon’s resignation, questioning how long this political instability will affect the nation. Senior economist Min Joo Kang from ING warned that market sentiment and business confidence would take a significant hit, reminiscent of the fallout from the previous presidential impeachment in 2017. While concerns linger over South Korea's credit rating and overall economic stability, Krishna Guha, vice chairman of Evercore ISI, believes the country's democratic institutions are resilient, predicting minimal disruption to business operations. Meanwhile, other markets in the Asia Pacific region, including Japan, Australia, and Hong Kong, experienced slight downturns, but remained relatively stable compared to South Korea.
