Political Instability and Market Volatility

The South Korean financial market is reeling from the effects of the ongoing state of emergency and the impeachment crisis involving President Yoon Suk Yeol. Concerns over prolonged political instability have led to a significant drop in the KOSDAQ, which plummeted by more than 5% in a single day. Simultaneously, the value of the won has hit its lowest level in over two years, reflecting broader economic concerns.

According to the Korea Exchange, the KOSPI index closed at 2,360.58, marking a 2.7% decrease from the previous trading day. The KOSDAQ also experienced a substantial decline, falling by 34.32 points to close at 627.01, its lowest level in nearly five years.

Impact on Market Capitalization and Investor Behavior

The domestic stock market saw a decrease in market capitalization by 73 trillion won on this day. Over the four trading days following the state of emergency, 144 trillion won evaporated. Despite foreign investors turning to net buyers, individual investors sold a total of 1.1866 trillion won worth of stocks, significantly impacting the two major indices.

Yeom Seung-hwan, director at LS Securities, explained, "Individuals are panic selling due to political uncertainty. Even if the political risks are resolved later, it will take time for individuals to regain hope in the domestic stock market."

Currency Collapse and Government Intervention

The exchange rate is also collapsing. In the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,437.0 won, marking a 17 won increase from the previous trading day. This is the highest weekly closing price since October 24, 2022.

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok held a macroeconomic and financial issues meeting, stating, "We are prepared to activate market stabilization measures, including the stock market stabilization fund, at any time." The government plans to inject up to 430 billion won through the Value-Up Fund by next week.

As the government steps in to stabilize the market amid chaos, the current status of the financial markets remains precarious. The outcome of the impeachment crisis and the effectiveness of government interventions will determine the future trajectory of South Korea's economy.