Korean stocks, won hit by martial law declaration
Political turmoil adds to Korea39;s investment risk premium
Foreign investors have withdrawn 14 bln from Korean stocks since August

SINGAPORE, Dec 4 Reuters Global investors have always valued South Korea below other markets for reasons ranging from tensions with the North to the tight structures of its conglomerates politics this week gave them cause to deepen that discount.

Korean stocks fell and the won plunged to twoyear lows on Tuesday after President Yoon Suk Yeol shocked the world by declaring martial law in the export powerhouse.

The impact was shortlived. Parliament overturned the ruling within hours and markets stabilised. Yet, for investors, it was a reminder of the reasons Korean stocks and the currency have underperformed global markets for months.

In the longer term, the martial law episode would accentuate the 39;Korean Discount39;, an elevated risk premium with trading Korearelated assets, equities, FX and bonds, said Daniel Tan, a Singaporebased portfolio manager at Grasshopper Asset Management.

Investors could require a bigger risk premium to invest in the won and Korean equities.

Korea39;s legendary discount refers to how cheaply stocks in the KOSPI 200 index are priced relative to the assets companies hold, known as the pricetobook PB ratio. A majority of companies listed on the KOSPI trade at a PB below 1, way below peers. The MSCI world index trades at a ratio of 3.5.

The current…