South Korea's largest U.S.-listed equity ETF rallied alongside semiconductor funds on Nov. 3, even as the country's domestic stock market suffered a steep selloff. The split screen highlights the growing importance of the global AI chip trade amid uncertainty over U.S. policy following the midterm elections.
The iShares MSCI South Korea ETF (EWY) gained 2.27% on Tuesday, outperforming the S&P 500, which advanced 0.44%. The iShares Semiconductor ETF (SOXX) rose 2.50%, while the VanEck Semiconductor ETF (SMH) added 2.01%, according to Nov. 3 performance data.
However, the gains did not reflect a rally in Seoul. South Korea's benchmark KOSPI fell 3.59% on Tuesday, with foreign investors selling a net 1.5 trillion won ($1.1 billion) of shares. Samsung Electronics dropped 4.15%, while SK Hynix Inc (SKHY) lost 5.03% on the country's stock exchange, Yonhap reported. Its U.S.-listed shares, however, closed 2.1% higher on Tuesday.
The different trading windows matter. Seoul's sell-off followed weakness in U.S. technology stocks during the previous session. Later, U.S. shares rebounded, with the Nasdaq rising 0.83% as Nvidia and Micron advanced 2.3% and 2.6%, respectively. EWY's U.S.-session gain captured the subsequent recovery in semiconductor sentiment, rather than a recovery in South Korean shares during local trading.
Midterm Outcome Adds a New Variable
Tuesday's rally also came before the U.S. midterm election results. Democrats secured control of both chambers of Congress, but the results emerged after U.S. markets closed, meaning the outcome could not have influenced that day's ETF performance.
The Democratic sweep could nevertheless shape the next phase of the AI semiconductor trade. Greater congressional scrutiny of AI companies, data center expansion and federal technology spending could introduce uncertainty around the infrastructure investment underpinning chip demand. However, tighter oversight does not necessarily translate into lower private-sector AI spending or weaker demand for semiconductors.
That uncertainty matters for EWY, whose exposure to South Korea's technology industry makes it sensitive to the global AI investment cycle. Samsung Electronics and SK Hynix are among the fund's largest holdings, giving investors substantial exposure to the memory-chip industry.
South Korea is also reinforcing its position in the sector. President Lee Jae Myung's proposed 2027 budget allocates 21.3 trillion won ($16 billion) to AI, semiconductors, physical AI and data centers, nearly double this year's allocation.
For investors, EWY's advance highlights how South Korea's technology exposure is increasingly tied to global semiconductor demand. Whether the rally continues will depend on chip-sector momentum, AI infrastructure spending and how the new U.S. political landscape affects technology policy.
