Korea May Be The Canary In The Emerging Markets Mine (EWY)

The KOSPI index in Seoul has been a rock-and-roll market for volatility traders everywhere, but now people are waiting for the music to go down a notch.

This is a market where buying and selling volatility has been dirt cheap and hedge funds have been actively playing for months. But now, the market is “leaking premium,” which means traders are getting ready for the KOSPI to crack.

Inflation is okay for now, but complacency in the whole region may be high. The KOSPI fell 1.6% last night — it has not lost more than 1% in a single session since November 11.

The fact is that emerging markets have been grinding for the last two weeks or so. But while waiting for breakdowns in China, India and even Brazil has been somewhat fruitful, it has yet to be especially satisfying.

If the KOSPI moves sharply lower from here, it would send the other core emerging markets — most of the BRIC, with the notable exception of Russia — down with it.

And if that happens, not a great time to be in the iShares MSCI South Korea Index ETF (NYSE:EWY).

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.

Leave a Reply

Your email address will not be published. Required fields are marked *