The Seoul Stock Exchange fell 2% on Wednesday, in unison with a weakening of the won, after the short-lived establishment of martial law in South Korea, while elsewhere in Asia, the intensification of Sino- American countries weighed down market sentiment.
The Seoul Stock Exchange stalls, the won limits its losses
The markets reacted strongly to the proclamation then the lifting a few hours later of martial law in South Korea by President Yoon Suk Yeol, who encountered opposition from Parliament and is now facing a public outcry in the country. On the Seoul Stock Exchange, the Kospi composite index fell 2% at the opening. Around 01:45 GMT, it was down 1.93% at 2451.79 points. The country's largest company, Samsung Electronics, plunged by around 3%, before limiting its losses: around 01:45 GMT, it dropped 1.12%.
For its part, the Korean currency collapsed by more than 2.5% against the greenback overnight, to 1,444.09 won per dollar, the lowest in more than two years. It erased its losses at the start of Asian trade, before stabilizing at 1,414 won per dollar (-0.05%). “This sudden proclamation of martial law surprised the markets, the population and the political world (…) The won collapsed before recovering when martial law was lifted and the authorities promised unlimited liquidity to stabilize the markets”observes Michael Wan, of MUFG bank.
The Bank of Korea convened a special meeting of its monetary policy committee on Wednesday to “discuss the situation (…) and market stabilization measures”according to the Yonhap agency. “If the worst economic consequences for South Korea, particularly on tourism and activity in the country, could have been avoided in the short term, political uncertainty could remain”with a possible impending dismissal of President Yoon, insists Michael Wan.
“From a macroeconomic perspective, South Korea was already one of the countries most vulnerable to the impact of (US President-elect) Donald Trump's planned tariffs, and this recent development could increase the 'premium' risk” on its currency”he adds. The won is already down around 10% this year against the dollar, becoming one of the worst performing currencies in Asia.
Tokyo in decline, geopolitical tensions worry
The Tokyo Stock Exchange was dominated by nervousness: around 01:45 GMT, the flagship Nikkei index fell by 0.36% to 39,108.83 points, and the Topix composite index by 0.46% to 2741.09 points. The market was penalized by the exacerbation of regional geopolitical risks: in addition to the South Korean situation, “Global trade tensions further escalated with China announcing restrictions on exports of key components” chip manufacturing to the United States, underlines Stephen Innes of SPI Asset Management.
Response to the tightening of Washington's customs measures, “this new salvo intensifies fears of economic decoupling, and American customs barriers will weigh like a sword of Damocles on Asian export-oriented economies”warns the analyst. Securities of exporting groups plunged together, like Nikkon (-3.18%), Canon (-1.31%) or Panasonic (-0.74%).
Jump in the yen, “safe haven”
The Japanese currency, considered a safe haven, initially benefited from concerns about political unrest in South Korea, climbing overnight to 148.65 yen per dollar, the highest since mid-October. But as the markets took note of the stabilization of the situation in Seoul, the yen erased its gains: it fell by 0.21% to 149.92 yen around 01:45 GMT. “The yen strengthened against the dollar yesterday due to risk aversion: this is now fading, but a certain caution will remain in order”comment analysts at Tokai Tokyo Intelligence.
Caution of Chinese places
In Hong Kong, the Hang Seng index fell 0.51% to 19,645.72 points around 01:45 GMT. The Shanghai composite index lost 0.36% to 3367.21 points and that of Shenzhen 0.37% to 2041.93 points. The market awaits the results of an important political meeting next week, “whose conclusions could provide clues on (…) the extent of the authorities' support for the economy expected in 2025”noted the MUFG experts. The oil market was sluggish: a barrel of West Texas Intermediate (WTI) fell 0.08% to $69.88, and that of Brent from the North Sea fell 0.07% to $73.57.
