'Martial Law and Impeachment Petition' Flies to Hankyung [AK Radio]

Since the declaration of martial law on the 3rd, followed by the transition to an impeachment crisis, the South Korean economy has been significantly affected. Although the martial law was lifted after 6 hours, the economic damage remains ongoing due to amplified political uncertainty. In this urgent situation where economic leaders hold emergency meetings daily to monitor economic trends, the stock market, exchange rates, and virtual asset markets have been consecutively impacted.

Stocks in Fear

First, in the stock market, a large-scale sell-off by foreign investors was concentrated after the martial law declaration. From the 4th to the 6th, over three days, foreign investors net sold more than 1 trillion KRW in the KOSPI market, delivering a shock to the stock market. In particular, the sell-off was concentrated in the financial sector, with net sales amounting to 709.6 billion KRW over three days. This reflects the sensitivity of financial stocks to changes in interest rates and exchange rates, with major financial companies suffering significant hits: KB Financial fell 18.2%, Hana Financial 13.3%, and Woori Financial 10.9%. JP Morgan issued a positive outlook, viewing this short-term decline as a buying opportunity, but market uncertainty still remains.

The Korea Exchange felt the crisis so acutely that it convened an emergency meeting immediately after the martial law outbreak to discuss whether to open the market. Financial experts evaluate that the exchange’s opening ultimately had a positive effect, but the sharp fluctuations in investor sentiment remain a clear risk factor.

Exchange Rate Soars

The exchange rate also surged sharply due to political instability, causing the Korean won to depreciate. On the night of the 3rd, when martial law was declared, the won-dollar exchange rate hit 1,442 KRW in after-hours trading, marking the highest level in over two years. Experts warn that if the psychological threshold of 1,400 KRW is surpassed, the rate could rise to the 1,500 KRW range or even 1,800 KRW. The rising exchange rate is expected to lead to higher prices for major imports such as energy and food, thereby stimulating consumer prices. This will impose additional burdens on the national economy and may constrain the Bank of Korea’s policy of lowering interest rates.

The exchange rate issue also directly affects ordinary consumers. Given South Korea’s high dependence on imported energy resources, the rise in exchange rates is likely to immediately increase oil and electricity costs. Additionally, low self-sufficiency in grains such as wheat and corn makes food price increases inevitable. This impacts basic staples on the common dining table, such as ramen and bread, potentially triggering overall inflation. Experts emphasize the need for active government intervention and foreign exchange market stabilization measures to alleviate consumer burdens caused by the sharp rise in exchange rates.

Virtual Assets Paralyzed

The virtual asset market also experienced significant volatility. On the night of the martial law declaration, Bitcoin plunged 30%, dropping from around 130 million KRW to 88 million KRW before recovering, repeatedly fluctuating sharply. During this period, the daily trading volume of the top five domestic exchanges exceeded 51 trillion KRW, setting a record. This figure is more than three times the combined trading value of KOSPI and KOSDAQ on the same day, which was 15 trillion KRW, highlighting a notable liquidity shift toward the virtual asset market. However, the high volatility reignited debates over whether virtual assets are suitable as investment assets.

The rapid changes in the virtual asset market present both new opportunities and risks to investors. Some investors attempted to buy at low prices during the crash, but frequent trading disruptions due to exchange access failures made transactions difficult. Notably, Upbit, a major exchange, accounts for 70-80% of total trading volume, underscoring the market structure’s reliance on a single platform, which was further exposed by this incident. Experts call for technical improvements and a decentralized trading structure to enhance the stability and reliability of the virtual asset market.

Shadow Cast Over National Credit Rating

Concerns also arise over the impact on the national credit rating. International credit rating agency Standard & Poor’s (S&P) stated that there would be no immediate credit rating adjustment, but Moody’s and Fitch warned that if political instability continues, pressure to downgrade South Korea’s credit rating could increase. This affects the country’s economic credibility and could cause greater economic losses in the long term.

The possibility of a credit rating downgrade may dampen foreign investors’ sentiment and cause instability in the domestic capital market. Experts emphasize that to prevent this, the government must restore trust in the international community and quickly achieve political stability. They also argue that efforts to secure liquidity in financial markets and stabilize the foreign exchange market should be pursued concurrently through policy measures.

This content was produced with the assistance of AI translation services.