More Trouble Ahead For The Korea ETF (EWY)

Take it with a grain of salt considering the source, but the North Korean press is reporting that joint U.S.-South Korean military exercises could spark outright war.

While we have heard similar provocations and threats out of Pyongyang over the years, this time the Korean peninsula is acting as a lightning rod for other issues in the Pacific Rim — ranging from China’s role as a de facto protector of North Korea to simmering territorial disputes with Japan in the region.

The Chinese foreign ministry opposes any military action in its “exclusive economic zone” without permission. The U.S. military drills are going on from November 28 through December 1.

Add in tension from the currency wars and Pyongyang’s expanding nuclear arsenal and this could be a somewhat more fractious outbreak of nerves than usual.

South Korea has already shuffled its defense ministry. Defense minister Kim Tae-yong resigned after media criticism for not promising an immediate retaliation to the first wave of shelling from the north; new rules of engagement may give troops the leeway to respond faster and more forcibly in the future.

The iShares MSCI South Korea Index ETF (NYSE:EWY) is declining again this morning and is now down 4.75% since news of the initial hostilities hit on Tuesday.

For possible risks and opportunities, check out this week’s Trading the Globe.

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.

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