South Korea's "emergency martial law" storm: The Korean stock market plunged, the Korean currency circle diving

On the evening of December 3, South Korean President Yoon Suk-yeol made an unexpected televised announcement declaring emergency martial law. Yoon accused opposition parties of "manipulating the National Assembly and disrupting the nation," vowing to eliminate "anti-state forces" within South Korea. The move immediately sparked widespread controversy both domestically and internationally, marking the most severe political crisis in South Korea since the end of military rule in 1987.

South Korea’s Financial Markets Face Turmoil

The martial law announcement sent shockwaves through South Korea’s financial markets:

Sharp Decline in the Korean Won

The Korean won plummeted to 1,430 per dollar, its lowest level in two years.

The won also fell to 961.89 against 100 Japanese yen, a one-and-a-half-year low.

Stock Market Tumbles

In U.S. trading on Wednesday, the Korea ETF (EWY) extended losses, falling as much as 7% intraday.

Samsung Electronics dropped 4.4% in London trading.

The KOSPI index opened 1.97% lower following the martial law announcement, with KB Financial Group down nearly 4%, and Samsung Electronics and SK Hynix each losing over 2%.

Cryptocurrency Market Plunges

South Korea’s cryptocurrency sector also faced severe disruptions. Bitcoin (BTC) on the Upbit exchange fell as much as 30%, hitting a low of $66,500.

Ripple (XRP) suffered a 60% drop, plummeting from $2.90 to $1.16.

Government’s Swift Intervention

Amid the financial turmoil, South Korea’s Ministry of Finance, central bank, and financial regulatory authorities quickly stepped in:

The Bank of Korea and the Ministry of Finance issued a joint statement pledging to take “all necessary measures” to stabilize the financial and foreign exchange markets, including providing "unlimited liquidity."

Regulatory authorities announced plans to deploy a 10 trillion won market stabilization fund.

Following Yoon's decision to lift martial law, the won's decline moderated, and market sentiment began to stabilize.

Martial Law Lifted but Political Uncertainty Persists

In response to mounting criticism and pressure both domestically and internationally, Yoon announced the lifting of martial law at 4:27 a.m. on December 4, stating he had acceded to demands from the National Assembly. While this move temporarily alleviated public and market anxieties, it failed to resolve underlying political instability.

The opposition party has announced plans to file an impeachment motion against Yoon, further fueling political uncertainty.

A Crisis and a Warning

This sudden declaration of martial law has not only deepened South Korea’s political turmoil but also left a lasting impact on its financial markets. The crisis serves as a stark reminder to investors of the risks posed by geopolitical instability, underscoring the importance of vigilance and risk management in times of uncertainty.

Although Yoon has rescinded the martial law order, the future trajectory of South Korea’s political landscape remains highly uncertain. The international community will closely monitor developments in South Korea’s political and economic environment.