[New York Stock Exchange] Instability in Korea and France's Politics Leads to Market Turmoil... Korean Companies and ETFs 'Plunge'

In the overnight New York Stock Exchange, the three major indices experienced turmoil. As political instability in Korea and France heightened, volatility increased. On the 3rd (local time), the Dow Jones Industrial Average closed at 40,705.53, down 76.47 points (0.17%) from the previous session. The S&P 500 index rose 2.73 points (0.05%) to 6,049.88, while the Nasdaq Composite Index climbed 76.96 points (0.40%) to 19,480.91.

As Korea and France faced extreme situations, early market risk aversion sentiment spread to the New York Stock Exchange. Uncertainty grew as news of President Yoon's emergency cabinet reshuffle spread, leading to a decline in the three major indices post-opening. With a preference for safe assets, U.S. Treasury prices rose, and the won-dollar exchange rate surged to over 1,440 won at one point, prompting investors to respond with stock sales.

France's unstable politics also shook investor sentiment. As the French government pushed through a budget proposal without a parliamentary vote amid opposition from the opposition party, concerns about the collapse of the French regime were raised.

However, in the afternoon, the New York Stock Exchange showed signs of recovery as President Yoon announced plans to lift the reshuffle, easing political instability.

Chrisna Guha, global strategy director at Evercore ISI, commented, "The traditional safe haven for investors, who had been shaken by President Yoon's reshuffle announcement and the subsequent parliamentary decision to lift the reshuffle, was disrupted," adding, "However, the overall impact on the market has been relatively limited so far."

On this day, the price of the iShares MSCI Korea ETF (EWY) plunged 7.1%, the Franklin FTSE Korea ETF (FLKR) dropped 6.7%, and the Matthews Korea Active ETF (MKOR) fell 6.2%. After the reshuffle was lifted, these ETFs reduced their losses to around 1% in the latter half of the session.

The prices of major Korean companies listed on the New York Stock Exchange also showed a sharp decline, but after the parliamentary decision to lift the reshuffle and President Yoon's announcement, the decline was reduced. Coupang, an e-commerce company, closed at $23.92, down 3.74%. After initially plunging up to 9.8%, the decline was reduced following the parliamentary decision to lift the reshuffle. Other major domestic companies listed as American Depositary Receipts (ADRs) on the New York Stock Exchange also failed to avoid the decline.

Posco Holdings fell more than 4%, while KB Financial (-1.60%), SK Telecom (-1.63%), KT (-0.44%), Korea Electric Power (-2.10%), Woori Financial Group (-1.51%), and LG Display (-1.76%) also showed declines.

Ali Sheiko, an analyst at BofA Securities, said, "The political situation continues to change," adding, "Clients should consider protecting themselves from downward pressure through short selling (trading) of ADRs and ETFs."

Reporter Han Kyung-sam from Hankyung.com jsk@hankyung.com