South Korean stocks and currency markets experienced sharp fluctuations on Wednesday (4 December) after President Yoon Suk Yeol declared martial law late the previous evening, only to revoke it hours later. This political turmoil triggered an impeachment motion from opposition lawmakers, intensifying market uncertainty.

The Kospi index opened 1.9% lower but recovered slightly to close down 1.44% at approximately 2,464. Major South Korean companies faced significant losses, with Samsung dipping nearly 1%, Hyundai Motor dropping over 2.5%, and Lotte sliding 2.1%.

The Korean won also faced volatility, plunging by 2.9% against the US dollar overnight before stabilising at 1,408.71 per dollar during the day. South Korea’s finance ministry pledged to inject “unlimited” liquidity into financial markets if required to counteract these impacts.

Other Asia-Pacific markets displayed mixed results: Japan’s Nikkei 225 remained flat, Hong Kong’s Hang Seng index recovered to gain 0.3%, and Australia’s ASX 200 fell 0.4%.

Korean American Depositary Receipts (ADRs) in the United States mirrored the volatility, with losses around 6% overnight. Despite this, Morningstar analysts maintained their fair-value estimates for South Korean stocks, viewing the dip as a short-term disruption and a selective buying opportunity.

Concerns about the won persist, with Maybank predicting continued pressure due to shaken investor confidence and potential political fallout. UOB forecasted the dollar-won exchange rate could reach 1,420 in early 2025, possibly accelerating if the political crisis deepens.

This event underscores the lingering political and economic risks associated with South Korea’s leadership, according to market strategists.