South Korean Equities Face Perfect Storm as Tariffs Loom
South Korea's export-driven economy looks increasingly vulnerable as stagflation risks mount and Trump's tariff plans take shape – creating a potentially attractive short opportunity through the EWY ETF.
Market Disconnect
Recent US data revealed a troubling economic scenario: slowing consumer spending alongside persistent inflation pressures. This stagflation combination weighs heavily on equities, particularly for export-dependent economies like South Korea.
President Trump's "Liberation Day" announcement on reciprocal tariffs threatens to accelerate this pressure. While markets have yet to fully price in these risks, our analysis suggests a significant correction may be imminent.
Key Risk Factors:
- Deteriorating Macro Environment: Quant Insight models show macro-warranted value for South Korean equities has fallen 4% in March alone
- Export Vulnerability: South Korea's economy is heavily exposed to global trade disruptions
- Pricing Disconnect: Despite worsening fundamentals, the KOSPI remains up 3.5% year-to-date
- Significant Overvaluation: EWY currently trades 5.7% above model value – among the richest global equity markets
Investment Implications
South Korean equities are particularly sensitive to three factors now under threat:
- Economic growth momentum
- Well-behaved inflation
- Healthy risk appetite
This combination of overvaluation and deteriorating fundamentals presents a compelling tactical opportunity for investors positioned to take advantage of potential market repricing.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Seize your opportunity
Deal on the world’s stock indices today.
- Trade on rising or falling markets
- Get one-point spreads on the FTSE 100
- Unrivalled 24-hour pricing
See opportunity on an index?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Try a risk-free trade
- See whether your hunch pays off
See opportunity on an index?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from one point on the FTSE 100
- Trade more 24-hour indices than any other provider
- Analyse and deal seamlessly on smart, fast charts
See opportunity on an index?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
