S. Korean stocks plunge amid martial law

Dec 05, 2024, 10:57 am

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Dealers at Hana Bank work in a dealing room at the bank’s headquarters in Seoul on Dec. 4, 2024, when the benchmark KOSPI closed at 2,464.00 points, down 1.44 percent from the previous trading day./ Source: Yonhap

AsiaToday reporter Lee Choong-jae

President Yoon Suk-yeol’s sudden imposition and lifting of martial law has put the South Korean economy in deep turmoil. Due to significant political uncertainty, the won-dollar exchange rate soared to the highest level in more than two years and the stock market plunged as a result of a mass exodus of foreign investors. The entire financial market, including not only the foreign exchange market but also the bond market, was in a state of anxiety.

The KOSPI compose index tumbled 1.44 percent, or 36.10 points, to 2,464.00 on Wednesday. Foreign investors sold more than 400 billion won, causing significant market drop.

The Korean won also fluctuated. In the Seoul foreign exchange market, the local currency closed at 1,410.1 won against the U.S. dollar, up 7.2 won from the previous day, the highest level in two years and a month. Immediately after the announcement of emergency martial law on the night before, the won-dollar exchange rate surged and breached 1,440 won during the day.

The financial and foreign exchange markets were in chaos due to the martial law fiasco. The treasury bonds and credit default swap (CDS) premiums rose, while major crypto tokens quickly plunged as much as 30% against the Korean won on South Korean exchanges before rebounding. In response, the government’s economic ministries rushed to take measures to stabilize the market.

“We will utilize every possible measures to stabilize the financial and foreign exchange markets, including providing unlimited liquidity, to address potential market instability following the declaration of martial law,” Finance Minister Choi Sang-mok said. Choi, who doubles as deputy prime minister for economic affairs, made the remarks during an emergency meeting with the heads of the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service late Tuesday. Choi added that the government will operate a 24-hour task force to monitor the economic and financial situation and prevent shocks to the real economy. He said to alleviate concerns about the current economic situation, the government will communicate closely and share information with the international credit rating agencies, domestic economic organizations and key economic allies such as the United States.

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