An index of over 90 large and medium-sized South Korean companies listed on the New York Stock Exchange plummeted within a couple of hours after the president's announcement by 7 percent to its lowest level in 12 months, reports CNBC.
Subsequently, the stocks recovered and three hours later, the index was at around minus 2.5 percent.
The domestic currency, the won, fell by approximately 1.9 percent against the dollar.
South Korea's economy is ranked 13th on the list of the world's largest.
On Wednesday morning, the central bank's monetary policy committee will hold an extraordinary meeting to discuss how to protect the markets from the consequences of the political chaos.
The decision to hold the meeting came before the president, in a televised address, promised to repeal the martial law.
Meanwhile, the authorities are promising to release "unlimited liquidity" to support the markets.
