Markets in South Korea are taking a hit as low manufacturing activity indicates a shrinking economy. The exchange traded fund, iShares MSCI South Korea Index Fund (NYSEArca: EWY), has lost 32% over the past three months, and slow economic growth in the U.S. and Europe have kept the economy vulnerable.
“Investors are cutting their exposure to risky assets as the extreme risks–such as Greek default–appear to be looming closer than they would have liked,” Jung Sang-jin, a senior fund manager at Dongbu Asset Management, said in a Reuters report. [Emerging Market ETFs Could be on Course for a Turn Around]
A survey indicates that the country’s manufacturing sector activity shrank for the second month in a row, as orders from the country’s main export markets, the U.S and Europe, sharply declined.
Expectations of a rate cut next month in the Eurozone may help the sentiment, and a possible increase in the size of the 400 billion Euro rescue fund will support this.
Meanwhile, the Finance Minister of South Korea is aiming for a $275 billion budget proposal next year, up 5.5% from this year. [South Korea ETF Retains Emerging Tag]
“The 2012 budget was set with a focus on job growth, while aiming to reach a fiscal balance in 2013,” the ministry said in a statement, on BBC News.
The International Monetary Fund cut South Korea’s growth forecast this year to 4%, down from 4.5%. Analysts say that despite the economic slowdown, there is no threat of the economy going into a recession.
iShares MSCI South Korea
Tisha Guerrero contributed to this article.