South Korea Declares Martial Law! Stocks and Currency Plunge

South Korea's President Yoon Suk Yeol declared martial law, accusing the left-wing bloc controlling the National Assembly of plotting rebellion and aligning with North Korean sympathies. The move has triggered significant market turbulence, with both domestic and international investors reacting sharply to the unexpected political development.

Market Fallout

The South Korean Currency won fell 1.9% against the dollar to 1,430, marking its lowest level since October 2022. US-listed South Korean companies faced steep declines: shipbuilder Posco and retailer Coupang both dropped about 7% in early trading, while South Korea-focused ETFs fell by over 5%.

Central Bank Intervenes

In response to the financial volatility, the Bank of Korea issued a statement pledging comprehensive measures to stabilize markets if necessary. Officials emphasized their readiness to act decisively, reassuring investors of their commitment to maintaining financial stability. A forthcoming meeting is expected to provide additional details on the central bank's strategies to address the crisis.

Analysts' Take

Currency analyst Lee Hardman of MUFG commented, This is highly unusual for a developed economy and will likely increase pressure on the won. Gareth Leather of Capital Economics remarked, The imposition of martial law was entirely unexpected and raises questions about the stability of South Korea's political system.

Conclusion

The martial law declaration has shaken both South Korea's political and economic foundations. While the Bank of Korea's proactive stance offers some reassurance, the markets are likely to remain volatile until more clarity emerges. This event underscores how political instability can reverberate across financial markets, even in advanced economies.