On Tuesday, South Korean stocks took a hit in U. S. trading after President Yoon Suk Yeol declared emergency martial law. He said this step was needed to protect the country from "communist forces" amid debates over a budget bill in parliament. The iShares MSCI South Korea ETF, which tracks large and medium-sized companies in the country, dipped as much as 7% before recovering to around 2. 6% after lawmakers voted to reverse the decree early Wednesday.

The market had been shaky for a few days, with the ETF experiencing five straight negative days and unusually high trading volume. Some notable drops included Korea Electric Power's ADRs down 5%, Coupang's shares falling 6%, KT Corporation losing 3%, and Posco's shares declining more than 6%. Yoon blamed opposition parties for sympathizing with North Korea and controlling parliament, but he didn't detail how martial law would impact governance and democracy.

The last time martial law was declared in South Korea was in 1980. This time, it banned all political activities and acts that could cause social unrest. In response, the Korea Exchange planned an emergency meeting to decide on market operations for Wednesday.

The White House National Security Council stated they were in contact with the South Korean government and closely monitoring the situation. Simultaneously, the U. S. dollar gained 1. 9% against the South Korean won on Tuesday.

South Korea's Market Wobbles After President Declares Emergency

Actions