By Reshma Kapadia, Brian Swint, George Glover, and Elsa Ohlen

South Korea's Parliament voted to end martial law, according to the New York Times, hours after President Yoon Suk Yeol put the country under military control in an unexpected announcement Tuesday.

This is breaking news. Read a previous version of this article below and check back for more analysis soon.

South Korean President Yoon Suk Yeol put the country under military control in an unexpected announcement Tuesday.

It's a major blow to the world's 14th largest economy and its markets. Its main stock index, the KOSPI, has a market capitalization of $1.4 trillion, though it was closed for the day when the announcement was made.

The iShares MSCI South Korea exchange-traded fund

EWY

-3.91% dropped 6.3% in New York trading. The South Korean won weakened about 2% against the dollar.

Yoon cited both domestic events in the country's parliament, where Yoon's party hasn't had control, as well as the threat from communist North Korea in his announcement. There weren't any other reports of any new military threats to the country that could have prompted the declaration.

"This has really come out of the blue," said Gareth Leather, a strategist at Capital Economics. "It's not really clear what the martial law is aimed at. It serves as a reminder that Korea's political system isn't as stable as many people thought it was."

While the domestic market is yet to react, its biggest stocks are sure to be in focus in the coming days, including the world's largest semiconductor company Samsung

005930

0.00%, chip maker SK Hynix 000660+3.84%, and battery company LG Energy Solution 373220+1.40%, as well as carmakers Hyundai 005380-0.69% and Kia.

The potential disruption could spread outside South Korea. The country's electronics firms are major players in global battery industry. LG and SK Innovation are the world's third and fifth largest electric vehicle battery manufacturers, with 16% and 6% market share as of last year, according to data from EV-volumes.com.

American depositary receipts (ADRs) tied to South Korean companies were tumbling early Tuesday. Electric utility Korea Electric Power fell 4.1%, steelmaker POSCO Holdings dropped 6.9%, and wireless telecommunications operator SK Telecom was down 1.7%. Shares in U.S.-listed Coupang, an online retailer that sells goods in South Korea, plunged 7.8%.

Yoon said that opposition parties had hijacked the parliamentary process, citing a motion to impeach top prosecutors and the opposition Democratic Party's rejection of a government budget proposal, Reuters reported. He didn't say what specific measures would be taken now.

"I declare martial law to protect the free Republic of Korea from the threat of North Korean communist forces, to eradicate the despicable pro-North Korean anti-state forces that are plundering the freedom and happiness of our people, and to protect the free constitutional order," Yoon said.

The parliament speaker is being blocked from entering parliament to convene a session, CNN reported, citing local news sources.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 03, 2024 11:57 ET (16:57 GMT)

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