Investors pulled cash out of a BlackRock exchange-traded fund tracking South Korean equities at the fastest pace on record on Wednesday amid a broad-based rally that has taken the nation’s stock index to all-time highs.
The $23 billion iShares MSCI South Korea ETF, known by the ticker EWY, recorded $409 million in withdrawals, marking its largest outflow on the fund’s history. The move came as the Kospi index soared 6% that day, boosted by companies in the supply chain for artificial intelligence. The gauge has leaped 75% this year.
“South Korean equities have massive momentum,” said Todd Sohn, chief ETF strategist at Strategas Securities. “No one knows when that will stop, but taking some exposure down makes sense when at these extremes.”
Wednesday’s outflow was the fifth in a row, totaling more than $900 million. While there are many positive factors boosting the equity market, there are growing concerns the rally is becoming excessive and may be driving some profit taking.
Short sellers have added to their bearish positions in South Korean stocks, with some seeing a market pullback as inevitable after the rapid rally, Ihor Dusaniwsky, head of predictive analytics at S3 Partners, wrote in a client note this month. Still, analysts see earnings growth of more than 200% for Kospi stocks over the next 12 months.
Written by: Leda Alvim @Bloomberg
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