Korea K-rashing As EM Volatility Explodes
Korea K-rashing
The moves in Korea continue to be absolutely huge. EWY bounced strongly yesterday but has turned south again, crashing 7.5% as of writing. Despite the latest puke in Korean equities, EWY remains above the 50-day moving average (first support). We are still well above the 100-day, not to mention the 200-day moving average. People tend to forget that parabolic moves all end the same way — but it takes time.
Source: LSEG Workspace
Massive volumes
EWY volumes are exploding.
Source: LSEG Workspace
Everything goes
When EM volatility explodes, investors are forced to cut exposure across related assets. EWY remains part of the broader EM trade, whether chip-heavy or not.
Source: LSEG Workspace
Super stressed
Looking beyond the S&P, and to illustrate the RoW fever in the volatility space, the EWY-to-SPX 1-month volatility ratio is in the 99th percentile on a 1–3 year lookback. Similarly, the EEM-to-SPX 1-month volatility ratio sits in the 98th percentile on a 1-year lookback.
Source: GS
Oil vol matters
After such a large rally in Korean equities, markets naturally become more sensitive to shocks. The explosion in oil and oil volatility quickly spills over into more sensitive assets such as EWY.
Source: LSEG Workspace
Parabolic doesn't care about fundamentals
While uncertainties around higher oil prices negatively impact most EM economies, Korea is among the least affected, according to GS. But when the risk manager says sell, fundamentals don't matter.
Source: GS
Chips over oil
Korea: Surging chip exports outweigh rising energy imports, even if oil reaches $100/bbl.
