South Korea Reels After President Withdraws Short-Lived Martial Law
South Korean markets plunged Wednesday as demands for President Yoon Suk Yeol‘s resignation escalated.
The market tumult followed a hurried U-turn from South Korean President Yoon Suk Yeol, who revoked a controversial martial law directive just hours after its initial declaration.
The Kospi index dropped 1.44% to end at 2,464 while the Kosdaq tumbled 1.98% to 677.15, partially recovering after sinking over 2% earlier in the day.
Yoon’s abrupt decree had sparked widespread condemnation while showcasing the growing political tension engrossed South Korea. Opposition lawmakers responded swiftly by proposing impeachment proceedings while ensuring Yoon’s calls for a declaration of emergency rule were denied.
In a display of determination, senior officials within the presidential office, including Yoon’s chief of staff and senior secretaries, tendered their resignations.
## Global Market Reactions:
Other Asian markets were not spared the ripple effects of South Korea’s political instability.
Japan’s Nikkei 225 held relatively steady, concluding the trading session with a minimal increase of 1.44% whereas the Topix declined by 0.47%, ending at 2,740.6.
Mainland China’s CSI 300 closed 0.54% down hitting 3,930.56, and Hong Kong’s Hang Seng index weakened 0.1%, closing at 19,730.
Australia also felt the repercussions of South Korea’s political volatility as its GDP for the third quarter missed projections, hampered by higher interest rates and persistent inflation.
Australia’s S&P/ASX 200 closed 0.38% lower at 8,462.6.
## Intervention and Volatility
Amid the financial tremors spurred by Dawn’s move, the Bank of Korea swung into action, affirming it was prepared to amplify short-term liquidity and take action to stabilize the FX market as needed following its emergency meeting. The bank also indicated it was ready to provide specialized loans to infuse funds into markets.
Media reports also revealed that South Korea’s top financial regulator was prepared to deploy a 10 trillion won ($7.07 billion) stabilization fund to calm frayed nerves in the stock market. Additionally, dealers confidentially disclosed that South Korea’s forex authorities appeared tosume increased sales of U.S.– Singapore– in an effort to curb declines in the Korean won.
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US markets showcased immediate reaction with the MSCI ETF, reflecting South Korea’s extensive market movement. Overnight in the U.S., (EWY) tumbled nearly 7%, hitting a new 52-week low, reflecting the substantial swings triggered by news. Ultimately, the ETF recovered slightly, sheds 1.6%.
What are the potential economic consequences for South Korea following President Yoon’s declaration and revocation of martial law?
## South Korea Reeling: A Nation on Edge
**Interviewer:** Welcome back to the show. Today we’re discussing the chaotic political landscape in South Korea following President Yoon Suk Yeol’s controversial declaration and immediate revocation of martial law. Joining us to shed light on this unfolding situation is Dr. Kim Min-Jae, a renowned political scientist specializing in Korean politics. Dr. Kim, thank you for being here.
**Dr. Kim:** Thank you for having me.
**Interviewer:** Can you help our viewers understand what prompted this sudden and dramatic move by President Yoon?
**Dr. Kim:** It appears President Yoon invoked Article 77 of South Korea’s constitution, which allows for martial law under extraordinary circumstances threatening public safety and order. [[1](https://www.abc.net.au/news/2024-12-04/what-is-martial-law-south-korea/104681802)]However, the specific catalyst for this decision remains unclear. Some speculate it may be related to escalating tensions with North Korea, while others point to growing domestic unrest.
**Interviewer:** The markets reacted sharply to this announcement. What does this tell us about the level of confidence in President Yoon’s leadership?
**Dr. Kim:** The plunge in both the Kospi and Kosdaq indices indicates a significant lack of confidence. Investors are clearly spooked by this perceived instability and the potential for further political turmoil. The swift revocation of the martial law order, while seemingly intended to quell fears, may have actually amplified them, demonstrating a lack of careful deliberation in the decision-making process.
**Interviewer:** Opposition lawmakers are calling for impeachment proceedings. How likely are they to succeed, and what could be the ramifications for South Korea?
**Dr. Kim:** Impeachment proceedings are a serious matter and will undoubtedly further deepen the political divide. Whether they succeed depends on the evidence presented and the political climate. If successful, it would likely spark further instability and uncertainty, potentially impacting South Korea’s international standing and economic performance.
**Interviewer:** Dr. Kim, this situation is clearly evolving rapidly. What do you see as the most pressing challenges ahead for South Korea?
**Dr. Kim:** The immediate challenge is to restore stability and confidence. President Yoon needs to clearly articulate his rationale for the martial law declaration and demonstrate a commitment to transparent and democratic governance. Addressing the underlying issues that led to this crisis, whether political, social, or economic, is crucial for the long-term stability and prosperity of South Korea.
**Interviewer:** Dr. Kim, thank you for your insightful analysis. This is clearly a developing story that we will continue to follow closely.
**Dr. Kim:** My pleasure.
