Asia report: Markets fall as investors watch Korean political turmoil

Political uncertainty deepened after president Yoon Suk Yeol faced calls for resignation following a controversial martial law decree that was imposed and then rescinded within hours.

A proposed impeachment bill by opposition lawmakers further rattled confidence.

“Asian markets declined following South Korea's political turmoil, triggered by a brief declaration of martial law that unsettled investors,” said TickMill partner Patrick Munnelly.

“The MSCI Asia Pacific Index fell by 0.3%, while the Kospi Index dropped as much as 2.3%.

“Japanese shares remained stable, while those in mainland China dipped; the won appreciated after a decline in offshore trading.”

Munnelly noted that the unexpected declaration of martial law by South Korean president Yoon late on Tuesday, later rescinded, threw the nation into political turmoil, prompting calls for his impeachment by the opposition.

“The uncertainty surrounding this significant economy, a key player in global trade, has increased investor apprehension in Asia, especially with Trump's potential return and China's economic challenges dampening sentiment.

“Oil prices have stabilised after experiencing the largest increase in over two weeks.

“Gold prices steadied after a rise on Tuesday, driven by the political instability in South Korea and France, which heightened demand for safe-haven assets.”

Markets in the red after shock martial law declaration in Korea

In South Korea, the Kospi 100 dropped 1.29% to close at 2,469.93, making it one of the worst performers in the region.

Key decliners included Kogas, which plunged 18.75%, along with significant losses in Posco Daewoo of 12.62%, and Doosan Heavy Industries of 10.17%.

Japan’s Nikkei 225 managed a marginal gain of 0.07% to close at 39,276.39, bolstered by strength in industrial names like Isetan Mitsukoshi, up 6.41%, and Kawasaki Heavy Industries, which advanced 5.77%.

However, the broader Topix index slipped 0.47%, reflecting mixed sentiment.

In China, the Shanghai Composite fell 0.42% to 3,364.65, while the Shenzhen Component declined 1.02% to 10,604.01.

Losses in Shanghai were driven by sharp sell-offs in several companies, with Guangdong Rongtai Industry and Wuxi Commercial Mansion Grand Orient both dropping over 10%.

Hong Kong’s Hang Seng Index was flat, down just 0.02% at 19,742.46, as weakness in property and infrastructure stocks weighed on the market.

Shenzhou International Group lost 3.02%, while CK Infrastructure shed 2.54%.

Australia’s S&P/ASX 200 fell 0.38% to 8,462.60, pressured by declines in Fletcher Building of 5.46%, Mesoblast of 4.87%, and Mineral Resources of 4.23%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 recorded a 1.5% drop to 12,896.67.

Fletcher Building also led losses in Wellington, dropping 5.86%, alongside SkyCity Entertainment Group, which lost 4.76%.

In currencies, the dollar was last up 0.72% on the yen to trade at JPY 150.68, as it gained 1.01% against the Aussie to AUD 1.5575, and advanced 0.64% against the Kiwi, changing hands at NZD 1.7112.

Oil prices saw modest gains, with Brent crude futures last up 0.19% on ICE to $73.76 per barrel, and the NYMEX quote for West Texas Intermediate edging 0.07% higher to $69.99.

Korean instability in focus, China services sector growth slows

At the top of the news agenda on Wednesday was South Korean president Yoon Suk Yeol, who was facing mounting calls after a controversial martial law decree was imposed and rescinded within hours.

Opposition lawmakers introduced a bill to impeach Yoon, according to the Democracy Party's spokesperson, intensifying political turmoil.

In response, Yoon's office confirmed that his chief of staff and senior secretaries had offered their resignations.

Amid the instability, the Bank of Korea held an emergency meeting and announced measures to ensure financial stability.

The measures included boosting short-term liquidity, stabilising the foreign exchange market as needed, and providing special loans to inject funds into the system.

Additionally, the Financial Services Commission prepared a KRW 10trn (£5.58bn) stock market stabilisation fund to address market volatility.

Early Wednesday, foreign exchange authorities reportedly intervened in the currency market to support the struggling Korean won.

Bond markets reflected the tension, with 10-year Korean government bond yields snapping a 13-day decline to trade at 2.720%.

In China, economic data revealed continued challenges for the service sector.

The Caixin services purchasing managers' index (PMI) fell to 51.5 in November from 52.0 in October, indicating slower growth.

However, business confidence rebounded to its highest level since April, and employment in the sector expanded for a third consecutive month, offering some optimism amid ongoing deflationary pressures.

Elsewhere, Australia reported slower-than-expected economic growth in the third quarter, with real GDP rising 0.3% from the previous quarter, below the 0.4% forecast.

Annual growth also missed expectations, increasing 0.8% compared to an anticipated 1.1%.

The slowdown reflected the impact of elevated borrowing costs and persistent inflation, as the Reserve Bank of Australia’s aggressive interest rate hikes - totaling 425 basis points since May 2022 - continued to weigh on the economy.

Reporting by Josh White for Sharecast.com.