The South Korean equity ETFs still falling

2015-06-12 09:18:42

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Since the April 24th the South Korean equity ETFs have fallen 14% below S&P 500, considering their beta values. The largest iShares MSCI South Korea Capped ETF (EWY) is almost 12% below S&P:

In fact, EWY's price has been fluctuating between between $50 and $65 for more than 4 years. Considering its beta, EWY is 55% below S&P in 4 years:

South Korea is still included in the emerging markets in such ETFs as iShares MSCI Emerging Markets (EEM), which is falling, together with other similar funds. But the downtrend on EWY is more considerable. What are the other reasons?

One them is the MERS outbreak, which is the largest outside Saudi Arabia. The virus has already infected 95 victims and has no known cure. Its impact on the economy is said to be the strongest during Q2 and Q3. And the performance of Korea's exports and manufacturing is already disappointing. There is a growing competition from Japan because of a strong KRWJPY rate.

On Thursday the central bank cut the interest rates for the fourth time in 10 months. However, at the same time IDC reported that Samsung's smartphone sales plummeted by more than 50% in Q1 2015 as compared to the same quarter in the previous year.


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