S. Korean markets ride out political crisis as global funds keep faith

Episode seen as enhancing country's standing, shows guard rails are in place

South Korea was spared a financial maelstrom even as it battles a political crisis, underscoring the extent to which its markets have matured, bolstered by swift efforts to reassure investors.

Global funds were net buyers of government bonds in December, and the cost to insure South Korea's debt against default hit only a four-month high.

This suggests investors maintained confidence in the country despite President Yoon Suk Yeol's failed bid to impose martial law on Dec 3 - a shocking move that threatened its democratic foundations and led to his impeachment by lawmakers.

At the heart of faith in South Korea is the crisis response by the top authorities, which won praise from investors.

This followed efforts to modernise the nation's market infrastructure to secure a spot in the FTSE Russell's bond index for countries such as the US and Germany.

"We think of Korea as a developed market within emerging markets," said Mr Leonard Kwan, portfolio manager of T. Rowe Price Group's dynamic emerging markets bond strategy. The episode has actually enhanced its standing, since the "institutions have worked as designed and the guard rails are in place".

South Korea's martial law crisis unfolded at night and, in the early hours, the financial authorities responded to the situation by pledging liquidity support to calm investor jitters.