Government Promises Unlimited Liquidity to Stabilize Financial Markets

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SEOUL, Dec. 4 -- The South Korean government has pledged to inject "unlimited liquidity" into the financial markets as needed to ensure their stabilization, according to the finance ministry. This announcement came just hours after an unexpected declaration of emergency martial law triggered a reaction in the markets.

The pledge was made after a crucial emergency meeting of ministers who deal with economic issues, chaired by Finance Minister Choi Sang-mok.

Following President Yoon Suk Yeol's declaration of emergency martial law late Tuesday, the South Korean won fell to its lowest point in several years, and local assets in overseas markets experienced a decline overnight.

The finance ministry stated, "The government will provide unlimited liquidity until the stock, bond, short-term funding, and foreign currency markets are fully stabilized."

During a press briefing later on Wednesday, Choi, who also serves as the deputy prime minister for economic affairs, reiterated the government's commitment to mitigate potential fallout from the martial law situation.

"The government will do its utmost to ensure that the uncertainties facing our economy are swiftly resolved," Choi stated.

Furthermore, he announced the establishment of a 24-hour government monitoring team to lessen any impact on the real economy.

Choi emphasized the critical need for all economic participants to work together to maintain stability, particularly amid rising domestic and international uncertainties.

On the same day, the KOSPI, South Korea's benchmark stock index, closed at 2,464.00, reflecting a decline of 1.44 percent or 36.1 points from the previous session. At one point, the index had dipped to as low as 2,442.46.

As for the Korean won, it was trading at 1,410.1 by 3:30 p.m., down 7.2 won from the previous close, but partially recovering from its earlier losses. The currency had fallen to as low as 1,442 per dollar during offshore trading hours, marking the weakest levels it had seen since October 25, 2022.

In addition, Choi met with leaders from six major business lobby groups, including the Korea Enterprises Federation and the Korea Chamber of Commerce and Industry, to discuss the repercussions of the martial law declaration.

He assured these leaders that the government would work to minimize uncertainties and support the corporate sector, ensuring that investment and export activities continue without disruption.

In addressing concerns from international investors and governments regarding South Korea's political stability, Choi emphasized that the emergency martial law and its associated measures were lifted through proper procedures.

He mentioned in a letter sent to financial ministers in key countries and heads of international organizations that, "South Korea's national system involving political and economic frameworks is operating as usual."

Choi also pointed out that non-economic disruptions are being effectively managed by the soundness of South Korea's economic system.

To further allay concerns, First Vice Finance Minister Kim Beom-seok held a video meeting with financial attaches from ten diplomatic missions in major countries, including the United States and Japan, to promote close communication with local governments and businesses.

Market analysts suggested that the market fallout may not be as severe as previously expected, largely due to both the brief duration of the martial law declaration and the quick government response.

Choi's swift actions were seen as essential in addressing the volatility in the Korean financial markets. Analysts believe the recent financial market fluctuations will likely be temporary.

Meanwhile, it was reported that Choi and all other cabinet members have submitted their resignations. President Yoon declared martial law after alleging that the main opposition Democratic Party sympathized with North Korea and disrupted the government with anti-state activities, marking the first martial law in 45 years.

The turmoil was quickly resolved after the National Assembly voted to reverse the measure, and the Cabinet officially approved its repeal early Wednesday.

Liquidity, Stability, Finance