South Korea faces heightened market volatility as a deepening political crisis shakes investor confidence. Stocks and the won have nosedived, exacerbated by recent events tied to embattled President Yoon Suk Yeol.

Kospi and Won Under Pressure

The Kospi Index tumbled 2.8%, while the Kosdaq dropped over 5%, marking its lowest point since April 2020. Meanwhile, the South Korean won edged closer to its weakest level since 2009, falling about 1% against the dollar. The financial turbulence follows President Yoon’s failed martial law declaration, which has spurred widespread protests and opposition calls for impeachment.

Leadership Uncertainty Fuels Investor Jitters

With Yoon under immense pressure to resign, the ruling People Power Party proposed Prime Minister Han Duck-soo oversee government operations temporarily. However, opposition parties have condemned this move as unconstitutional, intensifying political unrest. The Justice Ministry has also banned Yoon from international travel amid ongoing investigations.

Authorities are scrambling to stabilise markets, with plans to deploy a 300 billion won fund next week for “Value-Up” stocks, alongside an earlier 200 billion won initiative. A 10 trillion won stock stabilisation fund is also on standby. However, analysts remain sceptical. Jung In Yun of Fibonacci Asset Management Global noted that these measures might not suffice to restore investor confidence amid the ongoing crisis.

Economic Growth Forecasts Dampen

Goldman Sachs has maintained its below-consensus growth forecast of 1.8% for South Korea in 2025, citing risks skewed to the downside. The weakening won has amplified concerns, particularly as Korea struggles to navigate the uncertain global economic environment.

South Korea’s financial markets are poised for further turbulence, with political and economic uncertainties weighing heavily. The fallout from President Yoon’s missteps underscores the urgent need for effective leadership and decisive action to restore market stability.