SINGAPORE- Asian equities stumbled on Wednesday while currencies were volatile as traders scrambled to contend with the political storm in South Korea, where martial law was imposed and subsequently lifted hours later.
South Korea’s won strengthened in early trading buoyed by suspected intervention but remained close to the two-year low against the dollar it hit late on Tuesday.
The benchmark KOSPI index was down nearly 2 percent, taking its year-to-date losses to over 7 percent, making it the worst performing major stock market in Asia this year.
That left the MSCI’s broadest index of Asia-Pacific shares outside Japan which counts Samsung Electronics as one of its top constituents, down 0.32 percent on Wednesday.
South Korean President Yoon Suk Yeol said on Wednesday he would lift a surprise martial law declaration he had imposed just hours before, backing down in a standoff with parliament which roundly rejected his attempt to ban political activity.
“Martial law itself has been lifted but this incident creates more uncertainty in the political landscape and the economy,” said Min Joo Kang, senior economist at ING.
“We are concerned that these events could impact South Korea’s sovereign credit rating, although this is uncertain at this stage. However, this is a scenario that could happen.”
South Korea’s finance ministry said it was prepared to deploy “unlimited” liquidity into financial markets if needed, with the Yonhap news agency saying the financial regulator was ready to deploy 10 trillion won ($7.07 billion) in a stock market stabilization fund.
“A bit of uncertainty here given how the events played … that can fuel some rush to safety. But Korean authorities appear to be moving quickly to stabilize markets, and the impact is likely to be short-lived,” said Charu Chanana, chief investment strategist at Saxo. Still, the jolt to the market from East Asia stoked further worries of uncertainties around the globe, with investors already reeling from the political turmoil in France that has weighed on the euro which was down 0.11 percent at $1.04975.
