The outbreak of war in Iran has triggered a significant sell-off in global equities, with South Korea’s market particularly hard hit. The iShares MSCI South Korea ETF (EWY) plummeted from a 52-week high of over $152 to around $116 by March 31, reflecting investor concerns about South Korea’s heavy reliance on oil imports—70% of which transit through the Strait of Hormuz. The depreciation of the South Korean won further exacerbated the situation, increasing the cost of energy for its tech-heavy economy.
However, following a ceasefire announcement on April 8, the ETF rebounded sharply, rising 8% and recovering approximately 25% from its March lows. Despite this recovery, the OECD has downgraded South Korea’s GDP growth outlook by 0.4% and raised inflation expectations to 2.7%, indicating ongoing economic vulnerabilities tied to geopolitical tensions.
For market professionals, the key takeaway is the ETF’s exposure to energy price fluctuations and its heavy weighting in semiconductor stocks, particularly Samsung and SK Hynix, which together represent nearly 45% of the fund. As geopolitical risks persist, investors should remain cautious about the potential impact on South Korea’s economic stability and the ETF’s performance.
Source: fool.com