South Korea’s economy, Asia’s fourth-largest, is heavily reliant on exports, which make up almost 50% of GDP. In recent months, Japan’s aggressive monetary policy has greatly depreciated the Japanese yen, increasing Japanese exporters’ competitiveness on the global market. EWY’s weakness has continued despite BoK last month lowering interest rates to 2.25% from 2.5%, its first cut in seven months. [South Korea ETF Lower After Rate Cut]
At the time, the central bank cited slack growth in China, faltering growth in Europe and falling consumer price inflation. Combine those factors with the weak yen and possible end of QE, and there are at least five macro scenarios pressuring South Korean stocks. That is five too many and too many to expect that EWY will be anything more than “less bad” in the near-term.
iShares MSCI South Korea Capped Index Fund
ETF Trends editorial team contributed to this article.