The iShares MSCI South Korea ETF (EWY) experienced a significant pre-market plunge of 5.19% on Friday, reflecting heightened volatility in Korean equity markets.
This sharp decline was driven by a combination of record capital outflows and escalating investor concerns. The ETF saw $9.7 billion in net institutional outflows last week—the largest single-week withdrawal in its history—while short interest surged to 14.81%, reaching its highest level since February. Concurrently, geopolitical tensions in the Middle East, which have driven oil prices higher, intensified fears of persistent inflation, prompting a broad risk-off sentiment. A new Bank of Korea policy committee member specifically warned that inflation concerns are intensifying due to high oil prices triggered by the conflict.
Further pressure came from heavy foreign selling in the underlying Korean market, as investors took profits following a historic rally that had seen the benchmark KOSPI index briefly surpass the 8,000-point milestone. Analysts noted that the market had become expensive relative to its own history after an approximate 80% year-to-date gain, making it vulnerable to a correction amid global uncertainty over future interest rate hikes.
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