As political strife escalates between North and South Korea, South Korea’s exchange traded fund (ETF) have gotten hit hard. The rise of economic uncertainty and risk of war have investors turning a blind eye to what was a fast-rising emerging market.
The iShares MSCI South Korea Index (NYSEArca: EWY) has plunged around 20% over the last month as tensions escalate between the South and North, comments John Spence for MarketWatch. Seoul has accused North Korea of sinking one of its warships. North week recently announced it would freeze relations with South Korea. [Political Strife Could Threaten South Korea ETF.]
If you are considering investing in EWY, Morningstar analyst Patricia Oey says that “it is important to consider the outlook for Samsung Electronics, which accounts for almost 20% of the total portfolio.” Samsung expects improved earnings in its chip division for the next quarter.
Additionally, the EWY’s returns are influenced by the currency rates between the Korean won against the U.S. dollar since the fund doesn’t hedge its foreign-currency exposure.
South Korea has severed relations with the North, diminishing South Korea’s own GDP by $286 million, or only 0.3%, report Martin Hutchinson, Edward Hadas and Rob Cox for The New York Times. Nevertheless, the South Korean stock market, the Kospi Index, has dropped 4.8% since the official report on the sinking and the won depreciated 5.3% against the dollar.
For more information on South Korea, visit our South Korea category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.