South Korea vows market support in wake of turmoil

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South Korean officials stepped in to shore up support for the country’s financial markets as investors braced for political uncertainty after President Yoon Suk Yeol’s failed attempt to impose martial law.

Kim Byung-hwan, head of the country’s top financial regulator, said the government was ready to activate a Won10tn ($7.1bn) stock market stabilisation fund and a Won40tn bond market stabilisation fund if needed.

”We will closely monitor the foreign exchange soundness of financial institutions and respond to risks, such as margin calls triggered by rising exchange rates, through foreign currency liquidity provision via securities financing,” Kim said in a statement.

Kim urged institutions such as the stock exchange to focus on stabilising investor sentiment. “Given the heightened market volatility, even small incidents can amplify anxiety,” he said.

His comments come amid mounting calls for Yoon’s impeachment after his failed attempt to impose martial law triggered the country’s worst constitutional crisis in decades.

A successful impeachment by opposition parties that control parliament would trigger a snap election and prolong political uncertainty in Asia’s fourth-largest economy.

The country’s Kospi stock benchmark was down 1.4 per cent on Wednesday, while South Korea’s won strengthened 1.2 per cent against the dollar.

Bond prices were largely stable, with yields on two-year government debt rising 0.12 percentage points. Yields on 10-year bonds edged up 0.01 percentage point, while the 30-year bond was flat. Bond yields move inversely to prices.

Shares of Samsung Electronics, South Korea’s most valuable listed company, were down 1.3 per cent.

South Korea’s finance minister Choi Sang-mok said on Wednesday morning that the government would deploy “unlimited” liquidity to stabilise financial markets if needed, while the Bank of Korea’s monetary policy board held an emergency meeting and said it was “keeping all options open until the markets stabilise”.

The central bank expanded the scope of market operations as it intensified attempts to maintain liquidity and stability, increasing the number of securities eligible for open market operations.

It also began irregular repurchase agreements to “expand short-term liquidity supply” and increased the number of institutions eligible to trade repurchase agreements.