Home Mutual Funds South Korea-focused ETFs offer exposure to economy that may rebound

South Korea-focused ETFs offer exposure to economy that may rebound

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For investors optimistic that South Korea rebound from its pandemic-era slump, the iShares MSCI South Korea and Franklin FTSE South Korea exchange-traded funds (ETFs) offer broad exposure to one of Asia’s largest economies.

The funds, which underperformed benchmark indexes this year, hold shares of large- and mid-cap South Korean companies. The nation’s economy is expected to keep expanding this year and next after shrinking during the pandemic.

Key Takeaways

  • The two South Korea ETFs that trade in the U.S. are the iShares MSCI South Korea ETF and the Franklin FTSE South Korea ETF.
  • These funds give investors exposure to one of Asia’s largest economies.
  • The South Korean economy is expected to expand this year and in 2023 after growing at the fastest rate in more than a decade in 2021.

The funds are the only U.S.-traded ETFs focused on South Korea, excluding inverse and leveraged funds and those with under $50 million in assets under management (AUM). The MSCI Korea Index, fell 33% in the past 12 months, compared with the 18% drop in the S&P 500 Index as of Nov. 4.

We look in more detail below at these two funds below. All the numbers are as of Nov. 7.

  • Performance Over One Year: -29.7%
  • Expense Ratio: 0.57%
  • Annual Dividend Yield: 0.80%
  • Three-Month Average Daily Volume: 3,360,589
  • Assets Under Management: $2.7 billion
  • Inception Date: May 9, 2000
  • Issuer: BlackRock Financial Management

EWY tracks the MSCI Korea 25/50 Index, which gauges the overall performance of the mid-cap and large-cap segments of the South Korean stock market. The fund follows a value-based investing strategy and may appeal to investors seeking a short-term position in the South Korean market or targeted international equity exposure.

Over 36% of EWY’s holdings are allocated to the information technology (IT) sector. Industrials receives the next largest weighting, at about 11.4%, followed by materials stocks at 10.7%. EWY’s largest holdings are Samsung Electronics Co. (005930:KRX), a manufacturer of consumer and industrial electronic equipment and products, which represents over 23% of EWY’s portfolio; SK Hynix Inc. (000660:KRX), a maker of semiconductor products; and Samsung SDI Co. Ltd (006400:KRX), a battery and electronic materials maker.

  • Performance Over One Year: -31.5%
  • Expense Ratio: 0.09%
  • Annual Dividend Yield: 1.75%
  • Three-Month Average Daily Volume: 20,079
  • Assets Under Management: $51.7 million
  • Inception Date: Nov. 2, 2017
  • Issuer: Franklin Templeton

FLKR tracks the FTSE South Korea Capped Index, a market capitalization-weighted index composed of mid-cap and large-cap companies. The ETF focuses on value stocks and is weighted toward large caps.

Almost 35% of the fund’s holdings are allocated to the IT sector, followed by industrials and consumer discretionary. One attraction of FLKR is its low expense ratio, enabling direct access to South Korean equities at a low price compared with alternatives. Its top three holdings are Samsung Electronics, SK Hynix, and Samsung SDI, all described above.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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