South Korea ETF Rallies on Reopening Economy, 3rd Stimulus Installment

South Korea country-specific exchange traded funds climbed Wednesday on growing optimism over reopening economies and another stimulus package to stave off the devastating economic consequences of the coronavirus pandemic.

The iShares MSCI South Korea ETF (NYSEArca: EWY) increased by 4.1% on Wednesday.

South Korean equities were strengthening alongside the broader Asian markets on easing coronavirus-induced lockdown measures. Additionally, Seoul announced a 35.3 trillion won, or $28.8 billion supplementary budget that raised the total stimulus to 270 trillion won for the economy as the country tries to recover for its worst growth since the 1998 Asian financial crisis, CNBC reports.

The supplementary budget, the third stimulus installment this year, puts in place supportive measures equivalent to 14% of the gross domestic product in a bid to counteract the economic fallout from the coronavirus pandemic and the broad shutdown measures to quarantine the contagion.

The latest budget will direct more aid in protecting jobs, development of a vaccine for COVID-19, and provide discount coupons to bolster consumption. Additionally, more loans will be made to small- to medium-sized businesses suffering from the slump in sales and reduced consumption.

Finance Minister Hong Nam-ki argued the government had to take on the greater debt-to-GDP level, which is projected to rise to 43.5% of the economy from just below 40% before the outbreak.

“We’re facing an economic crisis now, we had no choice but to do more on the fiscal front as fiscal policies are the last bulwark (of government policies),” Hong told journalists in a news briefing.

South Korea has already reduced its economic growth outlook for the year to 0.1% from 2.4%, projecting the worst performance since 1998.

Further strengthening the markets, the Bank of Korea cut key interest rates twice since March.

However, Korea’s exports continued to decline for the third straight month in May and the outlook on the trade-heavy economy is murky due to the reduced consumption as the globe grapples with the pandemic and rising tensions between the United States and China.

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