South Korean Stocks Decline Amid Political Uncertainty
South Korean stocks experienced a steep decline on Wednesday as tensions rose following President Yoon Suk Yeol's unexpected declaration and subsequent lifting of martial law. This event raised fears of a potential political crisis in the nation.
Market Reaction
- KOSPI Index: The benchmark KOSPI index fell by 2% during morning trading, reaching its lowest point in over two weeks.
- Won Performance: The won traded at 1,415.78 against the USD, showing a 0.1% increase but experienced a surge to as high as 1,444.05 won, marking its highest level since November 2022.
Political Turmoil
The abrupt lifting of martial law created additional uncertainty in the political scene, with the Parliament opposing the declaration and voting against it. Yoon claimed his actions were targeted at political adversaries, amidst rising demands for his resignation or impeachment from the opposing Democratic Party.
Economic Concerns
Analysts from ING noted that although martial law has been lifted, the situation poses uncertainty for South Korea’s political landscape and economy, potentially affecting the country’s sovereign credit rating.
In response to the turmoil, the Bank of Korea scheduled a special meeting but analysts anticipated no significant changes to monetary policy. The Bank had recently cut rates by 25 basis points due to declining inflation and deteriorating economic conditions.
U.S. Reaction
The White House expressed relief over Yoon's decision to reverse the martial law declaration, especially considering there are nearly 30,000 U.S. troops stationed in South Korea.
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