Seoul, South Korea – South Korea’s finance ministry said on Wednesday it is ready to deploy “unlimited” liquidity into financial markets if needed after President Yoon Suk Yeol lifted a martial law declaration he imposed overnight that pushed the won to multi-year lows.
The announcement came after Finance Minister Choi Sang-mok and Bank of Korea Governor Rhee Chang-yong held emergency meetings overnight, and ahead of the BOK’s extraordinary meeting session abruptly scheduled for 9 a.m. local time (0000 GMT) on Wednesday.All financial, FX markets as well as stock markets will operate normally,” the government said in a statement.We will inject unlimited liquidity into stocks, bonds, short-term money market as well as forex market for the time being until they are fully normalised.The country’s financial regulator is ready to deploy 10 trillion won ($7.07 billion) in a stock market stabilisation fund any time, the Yonhap news agency said.South Korea’s wonKRW=KFTC, KRW= trimmed losses early on Wednesday, coming off the two-year low of 1,443.40 hit overnight after Yoon lifted his shock martial law declaration, honouring a parliamentary vote against the measure.South Korea’s parliament, with 190 of its 300 members present, unanimously passed a motion on Wednesday requiring the martial law be lifted.Korean shares .KS11 fell nearly 2% at open but also pared losses. Chipmaker Samsung Electronics 005930.KS fell 1.31%, while battery maker LG Energy Solution 373220.KS slid 2.64%.The KOSPI index and won are among Asia’s worst performing assets this year.Overnight, U.S.-listed South Korean stocks fell, while exchange-traded products in New York including iShares MSCI South Korea ETF EWY.P and Franklin FTSE South Korea ETF FLKR.P lost about 1% each.Martial law itself has been lifted but this incident creates more uncertainty in the political landscape and the economy,” ING economists wrote.The political turmoil comes as Yoon and the opposition-controlled parliament clash over the budget and other measures.The opposition Democratic Party last week cut 4.1 trillion won from the total budget proposal of 677.4 trillion won ($470.7 billion) the Yoon’s government submitted, putting the parliament in a deadlock over control of the 2025 annual budget.The parliamentary speaker on Monday stopped the revised budget from going to a final vote.A successful budget intervention by the opposition would deal a major blow to Yoon’s minority government and risk shrinking fiscal spending at a time when export growth is cooling.The negative impact to the economy and financial market could be short-lived as uncertainties on political and economic environment could be quickly mitigated on the back of proactive policy response,” Citi economist Kim Jin-wook said in a report.
