Gov’t pledges ‘unlimited liquidity’ to stabilize financial markets

The government will deploy “unlimited liquidity” into the country’s financial markets if necessary to help them stabilize, the finance ministry said Wednesday, hours after an unexpected declaration of emergency martial law sent ripples through the markets.

The pledge followed an emergency meeting of economy-related ministers chaired by Finance Minister Choi Sang-mok.

The South Korean won had dipped to a multiyear low and local assets in overseas markets dropped overnight after President Yoon Suk Yeol declared emergency martial law late Tuesday.

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

Later on Wednesday, Choi, who doubles as deputy prime minister for economic affairs, emphasized the government’s commitment to minimizing the potential fallout.

“The government will do its utmost to ensure that the uncertainties facing our economy are swiftly resolved,” Choi said during a press briefing.

Following a separate meeting with ministers, Choi also announced the creation of a 24-hour government monitoring team to mitigate the impact on the real economy.

“At a time when domestic and international uncertainties are growing, it is more important than ever for all economic players to work together to maintain stability,” he added.

The country’s benchmark stock index, the KOSPI, closed at 2,464.00, down 1.44 percent, or 36.1 points, from the previous session’s close, after dipping to as low as 2,442.46.

The Korean won was trading at 1,410.1 as of 3:30 p.m., down 7.2 won from the previous session, partially erasing its overnight drop.

The local currency had dipped to as low as 1,442 per dollar during offshore trading hours following the declaration, the lowest since Oct. 25, 2022, when the local currency traded at 1,444.20 against the greenback.

Choi also met with representatives of six major business lobby groups, including the Korea Enterprises Federation, the Korea Chamber of Commerce and Industry, and the Federation of Korean Industries, to discuss the aftermath of the incident.

He told the business community leaders the government will work to “minimize” the uncertainties and help the corporate sector not experience any disruptions to their activities, such as investments and exports, according to his office.

First Vice Finance Minister Kim Beom-seok held a video meeting with 10 financial attaches at diplomatic missions in major countries, including the United States, China, Japan and Britain, to call for close communications with local governments and business communities to relieve concerns over the South Korean economy.

Market observers suggested the fallout could be less severe than previously anticipated, citing the short-lived nature of the martial law declaration and the government’s prompt response.

“The volatility in the Korean financial markets overnight is likely to be a temporary incident, given how quickly the issue of the martial law declaration was resolved,” said Kim Byung-yeon, an analyst at NH Investment & Securities Co.

Meanwhile, Choi and all other Cabinet members have tendered their resignations, the ministry said.

Yoon had declared the martial law, accusing the main opposition Democratic Party of sympathizing with North Korea and paralyzing the government with anti-state activities. This marked the first imposition of martial law in 45 years

The turmoil was soon resolved after the National Assembly voted to reverse the measure, with the Cabinet formally approving its repeal early Wednesday.