Limited Impact of Martial Law on South Korean Markets

By Kim Han-joo

SEOUL, Dec. 5 -- Senior economic and financial officials in South Korea have stated that the recent brief implementation of emergency martial law has had a "limited" effect on the nation’s financial and foreign exchange markets thus far. This conclusion was reached during an emergency meeting involving Finance Minister Choi Sang-mok, along with leaders from the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service. The meeting focused on assessing the potential consequences of President Yoon Suk Yeol's announcement of emergency martial law made late Tuesday evening.

On Wednesday, South Korea's primary stock index, the KOSPI, ended the trading day at 2,464 points, reflecting a decline of 1.44 percent, down 36.1 points from the previous day's close. Throughout the session, the index even dropped to a low of 2,442.46 points. Additionally, the value of the Korean won dropped, closing at 1,410.1, which is a decrease of 7.2 won since the last trading session, partially reversing an earlier drop in value.

The finance ministry noted that while there was heightened market volatility right after the martial law announcement, the markets began to stabilize after the government issued its plans to support market stability. During the meeting, officials came to the consensus that the effect of the recent events on the financial and foreign exchange markets has been minimal up until this point.

The authorities urged for a "calm" and "measured" approach from the public and discouraged unfounded worries regarding the situation. At the same time, they emphasized the government's preparedness to react quickly in order to stabilize the markets if necessary, as uncertainties continue to loom both domestically and globally.

Moreover, the officials reiterated their promise to inject "unlimited liquidity" into the financial system if required. As part of their measures, in addition to a 10 trillion-won (approximately US$7 billion) stabilization fund for the stock market, the government also intends to roll out a 40 trillion-won bond market stabilization fund, as well as programs to purchase corporate bonds and commercial papers.

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