Emergency Meeting Called by Bank of Korea After Surprise Martial Law Lifted by President Yoon

The Bank of Korea has called for an urgent meeting following the unexpected decision of South Korean President Yoon Suk Yeol to lift a surprise martial law declaration overnight. The central bank is scheduled to convene an extraordinary board meeting at approximately 9 a.m. local time on Wednesday.

Last week, the BOK made a shocking move by cutting its benchmark interest rate by 25 basis points. This unexpected action has raised eyebrows in the financial community. Concurrently, local news agency Yonhap revealed that South Korea's financial regulator is poised to allocate 10 trillion won ($7.07 billion) to a stock market stabilization fund at any time, signaling their readiness to intervene in the market.

Emergency Measures and Political Unrest

Late on Tuesday night, President Yoon implemented an emergency martial law and mobilized the army. However, within hours, the National Assembly voted to overturn the emergency order, compelling Yoon to rescind the martial law early Wednesday morning. In a swift response to the political turmoil, the deployed military units were also withdrawn.

Market Reactions and Stabilization Efforts

Citi analysts expressed the view that the negative impact on the economy and financial market might be short-lived. They noted that any uncertainties in the political and economic environment could be quickly alleviated through proactive policy responses. South Korea's Finance Minister Choi Sang-mok, on Wednesday, pledged to inject unlimited liquidity into financial markets if deemed necessary to stabilize the situation.

Impact on Stock Markets

The political turmoil in South Korea had a notable impact on the stock markets, particularly in the U.S. On Tuesday, the iShares MSCI South Korea ETF (EWY), which tracks over 90 large and mid-sized companies in South Korea, plummeted by as much as 7%, reaching a 52-week low, before recovering to close 1.6% lower.

Despite the political turmoil, South Korea's stock markets commenced trading at the usual 9 a.m. KST, indicating a return to normalcy amidst the recent unrest.