Investing.com– South Korean stocks fell sharply on Wednesday, while the won hovered around two-year lows after President Yoon Suk Yeol abruptly declared and lifted martial law, heralding a potential political crisis in the country.
South Korea’s benchmark KOSPI index slid 2% in morning trade, hitting an over two-week low. The won’s USDKRW pair, which gauges the amount of won needed to buy one dollar, rose 0.1% to 1,415.78 won, after surging as high as 1,444.05 won in overnight trade- its highest level since November 2022.
Fears of heightened political turmoil rattled South Korea after President Yoon lifted a surprise declaration of martial law just hours after announcing its imposition.
Yoon’s declaration was heavily opposed by the Parliament, which voted to scrap his proposal.
Yoon claimed his declaration of martial law was aimed at his political foes, amid growing calls from the opposing Democratic Party for his resignation or impeachment.
“Martial law itself has been lifted but this incident creates more uncertainty in the political landscape and the economy.. We are concerned that these events could impact South Korea’s sovereign credit rating, although this is uncertain at this stage.” ING analysts wrote in a note.
The Bank of Korea declared a special meeting to be held on Wednesday in light of the political turmoil, although ING analysts said they did not believe monetary policy would be altered.
The BOK had last week unexpectedly cut rates by 25 basis points, amid easing inflation and worsening economic conditions in the country.
The White House said it was “relieved” that Yoon had changed course. There are nearly 30,000 U.S. troops stationed in South Korea.