South Korean markets faced a turbulent day after President Yoon Suk Yeol unexpectedly declared martial law. The dramatic move, a first in more than four decades, sparked widespread concern about political instability, prompting a sharp sell-off in South Korean assets.
The iShares MSCI South Korea ETF fell 8.7% to US$52.67, marking its worst intraday performance since August 2023. It has currently regained some ground and is trading down 1.8% at 55 US$.69.
Meanwhile, shares of London-listed Samsung Electronics fell 7.5%.
South Korean ADRs (American Depositary Receipts – shares of South Korean companies traded on US exchanges) also suffered losses, with Coupang Inc falling 9.8% and Posco Holdings Inc falling 4.3%.
The Korean won fell sharply, weakening 2.9% to 1,444.65 per U.S. dollar during New York trading hours, hitting its lowest level since 2022.
What happened?
In a televised address Tuesday evening, President Yoon said martial law was necessary “to protect a liberal South Korea from threats posed by North Korea’s communist forces and to eliminate anti-state elements that plunder the freedom and happiness of the people.
All major political parties, including President Yoon’s People Power Party (PPP), opposed the move.
Yoon and his administration have faced low approval ratings and multiple allegations of corruption, and have struggled to pass legislation through a parliament in which the opposition Democratic Party (DP) holds a majority of seats .
The DP cut about 4.1 trillion won from Yoon’s proposed 677 trillion won budget plan, reducing the government’s reserve fund and the activity budgets of Yoon’s office, procuratorate, police and the state audit agency.
In response to the declaration of martial law, the National Assembly was sealed and troops entered the building and attempted to gain access to the main hall, where voting is taking place. Party officials sprayed them with fire extinguishers and prevented their entry. Hundreds of protesters gathered outside.
Hours later, with 190 of the 300 MPs present, 18 from the PPP and 172 opposition MPs, some of whom scaled fences to enter the building, Parliament voted unanimously in a session urgently the lifting of the declaration. National Assembly Speaker Woo Won Shik said lawmakers “will protect democracy alongside the people.”
President Yoon then announced that he would lift martial law after a cabinet meeting,
Market response
The wave of selling eased slightly after Parliament’s vote and the authorities promised “unlimited liquidity” to stabilize the markets.
The won pared some losses, trading at 1,421.85 per dollar at midday in New York, although it remains one of Asia’s worst-performing currencies this year, having weakened by more than 9%.
The Korean Stock Exchange said it was revising its trading protocols for Wednesday amid continued volatility.
The unrest comes as South Korea grapples with broader economic challenges, including slowing export growth and an unexpected cut in interest rates last week. The Bank of Korea’s dovish stance has worsened the won’s weakness, with added pressure from global trade tensions and protectionist policies.
“Domestic uncertainty is adding to external pressures in recent weeks as the market begins to price in higher U.S. tariffs under the new Trump administration,” said Aroop Chatterjee, a strategist at Wells Fargo.
