The South Korean stock market experienced intense fluctuations on Tuesday, reflecting the political chaos that erupted following President Yoon Suk Yeol’s controversial decision to lift an emergency martial law decree. This unprecedented move raised significant concerns about the stability of South Korea, currently the world’s thirteenth-largest economy. The iShares MSCI South Korea ETF, which engages with over 90 prominent South Korean enterprises, experienced a significant dip, plummeting as much as 7% to reach a 52-week low. Although the ETF managed to reclaim some losses later in the day—settling at around 1.8% down—it is noteworthy that this downturn marks the ETF’s fifth consecutive day in the red, compounded by trading activity that exceeded the average by more than tenfold, with over 35 million shares changing hands.
Amid the unsettled market, the ramifications of Yoon’s declaration were evident across various sectors. Korean Electric Power’s American depositary receipts suffered a considerable blow, dropping 5%, while e-commerce titan Coupang witnessed a decline of 6%. Meanwhile, KT Corp., historically known as Korea Telecom, faced a 3% reduction in share value. The renowned South Korean steel producer, Posco, encountered a more severe fate, seeing its shares depreciate by over 6%. The rapid decline of these significant corporations underscores the direct correlation between political decisions and market performance, highlighting a concerning trend for investors.
Yoon’s martial law declaration instigated immediate action from the opposition, resulting in an extraordinary parliamentary session where 190 out of 300 National Assembly lawmakers convened to annul the emergency decree just a few hours after it was issued. The president accused these opposition members of having sympathies towards North Korea, suggesting a charged political environment that could further contribute to economic uncertainty. Importantly, Yoon refrained from clarifying how the martial law—typically characterized by military governance in crisis situations—would influence South Korea’s governance and democratic processes at large.
In response to the situation, the White House National Security Council stated that the U.S administration is actively monitoring developments in South Korea, indicating heightened international scrutiny regarding the stability of one of America’s key allies in the region. The market’s response was marked by a notable jump of 1.9% in the U.S. dollar against the South Korean won, further emphasizing the uncertainty created by the current events.
As South Korea navigates this tumultuous period, it remains imperative for both local and international investors to keep an eye on how the ongoing political developments may continue to ripple through the economy. The Korea Exchange’s announcement of an emergency meeting to evaluate the situation raises further questions regarding the market’s prospects in light of the current instability. With active measures being considered to respond to this crisis, the implications for governance, democracy, and economic health in South Korea will be closely scrutinized in the weeks to come.