North Korea attempted to roil global markets and send a message to South Korea late last week with another missile test, but the iShares MSCI South Korea Capped ETF (NYSEArca: EWY) showed some grit. EWY, the largest South Korea exchange traded fund listed in the U.S, gained more than 1% last week.
EWY, which tracks the MSCI Korea 25/50 Index, holds 112 stocks. Amid the geopolitical wrangling, the ETF has recently lost some assets, but is traditionally a favorite among investors due to South Korea’s advanced economy and the country’s emphasis on technology.
“The launch followed threats from Kim Jong Un’s regime that it would ‘sink’ Japan with a nuclear weapon,” reports Bloomberg. “Even with the escalating rhetoric and action from Pyongyang, the Kospi equity benchmark has continued to trade near record levels as analysts expect corporate profits to almost double this year. U.S. markets seemed to shrug off Thursday’s provocation from North Korea, which was responding to further United Nations sanctions.”
U.S. officials are coordinating with their South Korean counterparts, focusing more on diplomacy and economic sanctions against North Korea, while noting that military action against the oppressive North Korean regime is not the desired course of action.
EWY is up 29% year-to-date, making it one of this year’s best-performing single-country emerging markets ETFs. South Korea, Asia’s fourth-largest economy, is the second-largest country weight in the MSCI Emerging Markets Index behind China.
“North Korea has conducted more than a dozen missile tests this year, including several inter-continental ballistic missiles, leading to a war of words in August between U.S. President Donald Trump and Kim’s regime that has rattled global markets,” according to Bloomberg.
The $3.8 billion EWY, which is over 17 years old, allocates almost 41% of its weight to technology stocks. Alone, Samsung Electronics accounts for almost 24% of the ETF’s lineup. Financial services and consumer discretionary stocks combine for nearly 26% of the fund’s weight. Since the start of the third quarter, investors have added $24.2 million in new assets to EWY.
For more information on the South Korean markets, visit our South Korea category.
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.