Last night, South Korea surged to the top of the trending list, and things quickly took a turn. However, aftershocks continue even after the peak has passed. Just now, the chief of staff and chief secretary of the South Korean presidential office collectively resigned on December 4 local time. In addition, according to sources, at a non-public highest committee meeting held by the opposition party in the National Assembly, the leadership reached partial consensus on issues such as Yoon Seok-youl's withdrawal from the opposition party, requesting the collective resignation of the cabinet, and demanding the dismissal of Defense Minister Jin Young-chan.

South Korea's Chosun Ilbo and the American Cable News Network (CNN) reported on the 4th that South Korea's largest union, the Korean Confederation of Trade Unions (KCTU), announced that its union members will go on an indefinite strike until South Korean President Yoon Seok-youl resigns.

At the same time, the South Korean market also experienced a huge shock. In early trading, the South Korean KOSPI fell more than 2%, the South Korean won continued to plunge last night and this morning, and pressure also hit the Asia-Pacific markets. The Nikkei Index in Japan rose and then fell, and the Australian stock index also declined. Concerns about the political situation in South Korea continue.

Chairman Kim Bong-hwan of the Financial Services Commission of South Korea stated that all available measures will be taken to ensure the normal and stable operation of the financial markets. The 10 trillion won stock market stabilization fund will be ready for deployment at any time, and measures will be maximized in the bond market and capital market by utilizing the 40 trillion won bond market stabilization fund, as well as the corporate bond and commercial paper (CP) purchase plan.

Continuing to ferment

According to Yonhap News Agency, South Korean President Yoon Seok-youl made a live broadcast statement at the Blue House in Seoul at 4:27 a.m. on the 4th, announcing the lifting of martial law. This came shortly after he had declared martial law around 10:25 p.m. the previous night for over 6 hours.

Although Yoon Seok-youl announced the lifting of martial law, on one hand he strongly criticized the opposition party for unilaterally handling budget reduction cases and continuously bringing up impeachment. He stated, 'I request the National Assembly to immediately stop the blind actions causing paralysis of national functions.' On the other hand, following the lifting of martial law by South Korean President Yoon Seok-youl just 6 hours after declaring a state of emergency on the night of the 3rd, the largest opposition party, the Democratic Party of Korea, released a resolution on the 4th urging Yoon Seok-youl to resign immediately.

The Democratic Party held an emergency meeting of lawmakers at the National Assembly building that day and released the aforementioned resolution text. The Democratic Party stated that Yoon Suk-yeol's declaration of martial law was a clear violation of the constitution, did not meet any legal conditions, and the martial law announcement itself is not only fundamentally invalid, but also constitutes a serious violation of the constitution and internal disorder, meeting the impeachment criteria. The Democratic Party stated that Yoon Suk-yeol trampled on the constitution and democracy, and the Democratic Party would never turn a blind eye to Yoon Suk-yeol's crimes of undermining constitutional government. If Yoon Suk-yeol refuses to step down immediately, the Democratic Party will initiate the impeachment process immediately in response to public opinion. The Democratic Party will fight alongside the entire nation to defend the democratic and constitutional order of the Republic of Korea.

According to CCTV News, the ruling party in South Korea, the National Power Party's leadership, held an emergency meeting on December 4th local time to discuss countermeasures following President Yoon Suk-yeol's announcement to lift the state of emergency. According to multiple attendees, the National Power Party reached partial consensus on Yoon Suk-yeol's withdrawal from the party, demands for the collective resignation of the Cabinet, and the dismissal of Defense Minister Jin Young-seon at a closed-door highest committee meeting held in the parliament. The National Power Party will immediately convene an emergency parliamentary general meeting after the highest committee meeting to make final decisions on the relevant issues.

Shortly afterwards, news came that the presidential office in South Korea collectively expressed their resignation, with the Chief of Staff and Chief Secretary of the South Korean Presidential Office resigning collectively. This may mean that South Korea's era under Yoon Suk-yeol is coming to an end.

Initiate market rescue.

In early trading today, South Korea's stock index continued to decline. Financial stocks in South Korea were sold off, with KB Financial Group leading the decline with a 6% drop. KB Financial Group fell over 7% at one point, Hanwha Financial Group dropped by more than 5%, and Shinhan Financial Group fell by over 4%.

On the evening of December 3rd Beijing time, the exchange rate of the South Korean won against the US dollar suddenly plummeted, with a decrease of 2.82% at one point, to 0.69, hitting a new low since October 2022. Subsequently, the exchange rate of the South Korean won against the US dollar rebounded, with the majority of losses recovered so far, at 0.707. In early trading today, the US dollar continued to rise against the South Korean won.

Against the backdrop of stock and currency plunges, news of market rescue also continues to emerge. Foreign exchange traders stated suspicions that the South Korean authorities sold US dollars at the onshore market opening to limit the decline of the South Korean won. In addition, Financial Services Commission Chairman Kim Bong-hwan stated that all available measures would be used to ensure the normal and stable operation of the financial markets; a 10 trillion won stock market stabilization fund will be ready for deployment, and in the bond market and capital markets, the maximum utilization of a 40 trillion won bond market stabilization fund as well as a corporate bond and commercial paper (CP) purchase plan will be initiated.

Min Joo Kang, Senior Economist at ING Group, stated that the turmoil of the martial law in South Korea may affect the country's sovereign credit rating, though it is still uncertain at this point.

Impact on the Asia-Pacific Region

In early trading today, as South Korean stocks declined, pressure also spread to the Asia-Pacific markets. After rising, the Nikkei Index turned down, and the Australian stock index also fell. So, what impact does the turmoil in South Korea have on the Asia-Pacific region?

Firstly, the volatility in the South Korean market may be strengthening the risk aversion mode and prompting a stronger US dollar. In early trading today, the US Dollar Index rose again, while major non-US currencies such as the Japanese Yen, Euro, and Chinese Yuan all saw declines. The continuous rise of the US dollar may exert certain pressure on equities. Therefore, the performance of the Asia-Pacific stock markets this morning is not particularly good.

Secondly, currently, South Korea is a major global economic power and holds a significant position in the global economy. The manufacturing and service sectors in South Korea play a dominant role in the national economy, especially in the fields of automobiles, electronics, steel, and shipbuilding. South Korea's export volume holds a crucial position in the global market, although recent growth in South Korean exports has slowed down, its performance remains strong in areas such as semiconductors. This means that if South Korea experiences turmoil, related supply chains may face disruptions.

Thirdly, last night, geopolitical instability in South Korea caused unusual movements in US stocks and shipping companies, with Frontline rising by 7.4% and dry bulk carrier HSHP up by 6.68%. Some brokerage analysts believe that geopolitical instability could lead to congestion at South Korean ports, affecting ship efficiency. South Korea's crude oil imports account for 7% of the global total, refined oil imports account for 3.4% of the global total, and refined oil exports account for 5.6% of the global total; iron ore imports account for 4.5%, and thermal coal imports about 8.3% of the global total.

Editor/rice