As political strife escalates between North and South Korea, South
Korea's exchange traded fund (
) have gotten hit hard. The rise of economic uncertainty and risk
of war have investors turning a blind eye to what was a fast-rising
iShares MSCI South Korea Index (NYSEArca:
has plunged around 20% over the last month as tensions escalate
between the South and North,
comments John Spence for MarketWatch
. Seoul has accused North Korea of sinking one of its warships.
North week recently announced it would freeze relations with South
Political Strife Could Threaten South Korea
If you are considering investing in EWY, Morningstar analyst
Patricia Oey says that "it is important to consider the outlook for
Samsung Electronics, which accounts for almost 20% of the total
portfolio." Samsung expects improved earnings in its chip division
for the next quarter.
Additionally, the EWY's returns are influenced by the currency
rates between the Korean won against the U.S. dollar since the fund
doesn't hedge its foreign-currency exposure.
South Korea has severed relations with the North, diminishing
South Korea's own GDP by $286 million, or only 0.3%,
report Martin Hutchinson, Edward Hadas and Rob Cox
The New York Times
. Nevertheless, the South Korean stock market, the Kospi Index, has
dropped 4.8% since the official report on the sinking and the won
depreciated 5.3% against the dollar.
For more information on South Korea, visit our
South Korea category
Max Chen contributed to this article.