South Korea’s currency recovered while its stocks fell Wednesday, as investors braced for prolonged political uncertainties following a brief decree of martial law by President Yoon Suk Yeol.
Yoon’s shocking order was a high-stakes move he claimed would prevent the main opposition Democratic Party from trying to paralyze his administration amid a rift that’s now set to deepen markedly. The Democratic Party said it is seeking charges of treason and impeachment against Yoon over the martial law order.
Efforts by the Yoon administration to reduce the “Korea Discount” —persistent undervaluation of the nation’s stocks—have had little impact. The Kospi trades at about 0.8 times one-year forward estimated book value, while the MSCI World Index trades at 2.9 times, according to data compiled by Bloomberg.
Bank of Korea’s monetary board announced steps to increase short-term liquidity and also pledged measures in the event of currency volatility. Foreign-exchange liquidity is showing no particularly unusual signs after the brief episode of martial law, said Yoon Kyoungsoo, director general of the central bank’s international department, at a briefing in Seoul.
Others were less sanguine. The ongoing drama poses a major setback for government efforts including the “Corporate Value-Up” program, which aims to erase the equity discount by making company boards more accountable to shareholders.