The first warning of the foreign exchange crisis by Loch: "Korean martial law was a coup in a teacup... Prolonged impeachment process will weaken the won"

David Roche, a global investment strategist and founder of Independent Strategy, described the martial law situation in Korea as a "coup in a teacup," but also predicted that "if the presidential impeachment process is prolonged, the Korean won could continue to weaken." Roche, formerly of Morgan Stanley, was one of the first on Wall Street to warn of the 1997 Asian financial crisis, including in Korea.

David Roche, Founder of Independent Strategy. Photo by David Roche.

On the early morning of the 4th, Roche published a report titled "Korea Martial Law - Coup in a Tea Cup" on Quantum Strategy, revealing these views. He first stated, "I do not hold any Korean assets or currency," and advised global investors, "If you do hold any, stay calm. This situation is bonkers even by Korean standards, and it will soon disappear and be forgotten." The report was released shortly after the Korean National Assembly unanimously passed a resolution to lift the martial law following several hours of confusion caused by its declaration.

Roche pointed out, "There is no reason to declare martial law. There are no issues at the (North Korean) border, nor is there domestic unrest," adding, "The only justification for declaring martial law is that President Yoon Seok-yeol and his party, the People Power Party, are facing significant obstacles in the National Assembly and have not even passed the budget." He also emphasized that even Han Dong-hoon, the leader of the People Power Party, condemned the martial law declaration and that under the Korean constitution, the National Assembly can lift martial law with a majority vote. He added, "The resolution was passed unanimously with all 190 attending lawmakers from both ruling and opposition parties voting in favor," and predicted this would promptly lead to a swift declaration lifting the martial law.

In particular, Roche anticipated that this incident could lead to the impeachment of President Yoon. He also forecasted that if the impeachment process drags on, political uncertainty would increase, causing the Korean won to weaken further. However, regarding the dollar-won exchange rate of about 1430 won at the time of the report, he noted that the won was "excessively undervalued."

Following President Yoon's declaration of emergency martial law the previous night, the financial markets experienced shocks, with the dollar-won exchange rate surging to the 1441 won level and Bitcoin prices in the won market plummeting. The stock prices of Korean companies listed on the New York Stock Exchange, such as Coupang, POSCO Holdings, KT, and KB Financial Group, also fell sharply. Although some stability was regained after the National Assembly passed the resolution and President Yoon declared the lifting of martial law around 4:27 a.m., concerns about short-term uncertainty persisted both inside and outside the market.

On the same day, Roche also mentioned the possibility of a left-leaning new president emerging after President Yoon's impeachment. Regarding President Yoon, he used a satirical expression suggesting he would be "sent to a Buddhist temple," emphasizing the potential for political downfall and seclusion. He defined the incident as a "coup in a teacup," borrowing from the idiom "storm in a teacup," and stated, "Korea has come too far on the path of democracy for this coup to take hold," which can be interpreted as an assessment that Korea's democracy is strong enough to check undemocratic actions such as martial law.