The exchange-traded funds that track the South Korean equity market fell on Monday, in the wake of North Korea’s weekend launch of a ballistic missile.
The launch was seen as one of the first tests for the foreign policy of President Donald Trump’s administration, and so far his response is uncertain. In a statement, Trump made no mention of North or South Korea, nor any possible retaliatory plans, saying, “I just want everybody to understand and fully know that the United States of America stands behind Japan, its great ally, 100%.”
Tensions between North and South Korea have been elevated for decades, but the new U.S. administration remains a wild card for policy regarding the region. While South Korea-based ETFs are slightly higher since Trump’s election in November, any new aggression from Pyongyang could spur heavy volatility.
The iShares MSCI South Korea Capped ETF /quotes/zigman/22227/composite EWY +0.77% fell 0.6% on Monday, while its currency hedged equivalent /quotes/zigman/54185436/composite HEWY +0.28% lost 0.6%. Both are coming off a week of declines, though they remain within a few percentage points of their 52-week highs, according to FactSet data.
Since the election, the iShares ETF is up 2.6%, while the currency hedged ETF is up 2.1%. Both are far outpaced by the 8.7% increase of the S&P 500 /quotes/zigman/3870025/realtime SPX +0.03% . The Korea Composite Index /quotes/zigman/1652118/delayed KR:SEU -0.10% , meanwhile, has gained 3.8% during the same period.
Also since the election, the iShares fund has seen outflows of $399.7 million, reducing its total assets to $3.1 billion. The currency hedged fund has seen outflows of $6.2 million, according to data from ETF.com, meaning that the vast majority of its assets have left over the past three or so month. It currently has assets of $2.6 million.