The political crisis of President Yoon Suk Yeol dealt another blow on Wednesday to South Korea's financial markets after South Korea's Kospi plummeted by 1.44%.
Closing at 2,464 points, the more miniature Kosdaq fell also by 1.98% and closed at 677.15. This dip came after a volatile day, with the markets recovering slightly following an initial drop of more than 2%.
The confusion was caused by President Yoon declaring martial law only to lift it hours later, spurring widespread concern and criticism, per CNBC. After the 'failed' martial law controversy, opposition lawmakers in South Korea have moved to introduce an impeachment bill against President Yoon. Yoon's office retaliated by tendering the resignation of his chief of staff and senior secretaries, thus signaling further intensification.
The longer-term economic prospects for South Korea are also going to be affected by political instability once investors lose their confidence in the country's leadership.
South Korea's Financial Markets
For now, the South Korean government is striving to stabilize the unresting financial markets. According to Reuters, the country's central bank stated it would take measures to shore up short-term liquidity, and its financial regulators declared they would not hesitate to tap into a stock market stabilization fund amounting to 10 trillion won ($7.07 billion).
The government has also actively managed the foreign exchange market by reportedly selling US dollars, which limits the fall of the Korean won.
Analysts believe that the political climate in South Korea would hurt investor sentiment for a long time and would take a long time to bring back their confidence in the market.
On the other hand, however, political issues concerning South Korea spilled into the other market across Asia. Japan Nikkei 225 showed little changes. In China CSI 300, though down by -0.54%, all players across the region are quite focused on it, knowing that any political instability will affect both countries since it is relative in importance regarding the country's market's overall stance.
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