Investing.com– Most Asian stocks dropped on Wednesday, led by a slump in South Korean shares after President Yoon Suk-Yeol’s abrupt reversal of a short-lived martial law stirred political unrest and eroded investor confidence across the region.
Regional markets took middling cues from a mildly positive overnight session on Wall Street, as investors awaited more cues on U.S. monetary policy from an address by Federal Reserve Chair Jerome Powell later in the day. U.S. stock index futures were mildly positive in Asian trade.
South Korean stocks slide on martial law tensions
South Korea’s KOSPI index slumped more than 2% after President Yoon Suk-Yeol declared martial law on Tuesday in an effort to counter “anti-state forces” among his political opponents. However, the move faced immediate backlash, including parliamentary rejection and public protests, leading him to revoke the measure within hours.
In response, South Korean legislators demanded Yoon’s impeachment, plunging the nation into its most significant political crisis in decades.
Martial law involves replacing civilian governance with military rule, suspending civilian legal processes in favor of military ones, and potentially suspending standard civil liberties for its duration.
Yeol’s move undermined investor confidence in the country, with ING analysts stating that sustained turmoil could even bring down South Korea’s credit rating.
Asia markets fear spillover from South Korea
Markets grew wary of any potential spillover from political turmoil in South Korea, given that the country is seen as a major pillar in East Asia’s economy.
Japan’s Nikkei 225 fell 0.4%, while the TOPIX declined 0.7%. “We are monitoring (the South Korea’s situation) with particular and grave interest,” Japan’s Prime Minister Shigeru Ishiba told reporters.
