The iShares MSCI South Korea ETF (EWY) plummeted 7.16% during intraday trading on Friday, reflecting a sharp sell-off in Korean equity exposure.
The dramatic decline was driven by a historic wave of capital withdrawal from the fund. Institutional investors pulled a record $9.7 billion from BlackRock's iShares MSCI South Korea ETF last week, marking the largest single-week outflow in the product's history. Concurrently, short interest in EWY surged to 14.81%, reaching its highest level since February, signaling intense bearish sentiment among traders. Geopolitical risks also intensified the sell-off, as supply chain disruptions from the Middle East conflict—including attacks on Korean commercial vessels—eroded the market's previous safe-haven appeal.
Compounding the pressure, a new Bank of Korea policy member warned that inflation concerns are intensifying due to high oil prices triggered by the Middle East conflict. This contributed to a broader risk-off sentiment, with global markets repricing expectations for central bank interest rate cuts. The sell-off also represents significant profit-taking, as the underlying Korean market had rallied approximately 80% year-to-date before the correction, leading to heavy foreign selling in technology-heavy benchmarks.
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