Bank of Korea holds emergency meeting after Yoon lifts martial law

The Bank of Korea is holding an emergency meeting after South Korean President Yoon Suk Yeol lifted a surprise martial law declaration overnight.

The central bank was set to convene an extraordinary board meeting at around 9 a.m. local time on Wednesday. Last week, the BOK cut its benchmark interest rate by 25 basis points in a surprise move.

Around that time, local news agency Yonhap reported that South Korea's regulator financial regulator said it is prepared to allocate 10 trillion won ($7.07 billion) to a stock market stabilization fund any time.

Late Tuesday night, Yoon declared an emergency martial law and mobilized the army. Within hours, the National Assembly voted to overturn the emergency order, forcing Yoon to lift martial law early Wednesday morning. The military units that were deployed have also been withdrawn, Yoon announced.

"In our view, the negative impact to the economy and financial market could be short-lived as uncertainties on [the] political and economic environment could be quickly mitigated on the back of proactive policy response," Citi analysts said in a note. 

South Korea's Finance Minister Choi Sang-mok on Wednesday vowed to pump unlimited liquidity into financial markets, if necessary to stabilize it.

South Korean stocks experienced significant fluctuations in the U.S. on Tuesday amid political turmoil in Korea. The iShares MSCI South Korea ETF (EWY), which tracks more than 90 large and mid-sized companies in South Korea, tumbled as much as 7% to hit a 52-week low before cutting losses to close 1.6% lower.

South Korea's stock markets started trading at the usual 9 a.m. KST.