South Korea Etfs: A Guide To Investing

Exchange-traded funds (ETFs) are a great way to invest in South Korea. The easiest way to invest in the entire South Korean stock market is to invest in a broad market index, which can be done at a low cost using ETFs. There are three indices available on the South Korean stock market that are tracked by six ETFs. The iShares MSCI South Korea ETF and the Franklin FTSE South Korea ETF are the only U.S.-traded ETFs focused on South Korea. These funds give investors exposure to one of Asia's largest economies.

Exposure to large and mid-sized companies in South Korea

The iShares MSCI South Korea ETF (EWY) seeks to track the MSCI Korea 25/50 Index, which measures the performance of mid-cap and large-cap segments of the South Korean stock market. This ETF provides targeted access to South Korean stocks and allows investors to express a single-country view. As of November 2024, the expense ratio for EWY was 0.59%.

On the other hand, the Franklin FTSE South Korea ETF (FLKR) tracks the FTSE South Korea Capped Index, which is also composed of mid-cap and large-cap companies. One advantage of FLKR is its low expense ratio, which stood at 0.09% as of November 2022.

By investing in these ETFs, individuals can gain exposure to a diverse range of sectors within South Korea, including information technology, industrials, consumer discretionary, and more. It is important to note that the weightings and allocations may vary over time as the portfolios are rebalanced.

Targeted access to South Korean stocks

The iShares MSCI South Korea ETF (EWY) offers targeted access to South Korean stocks. The fund seeks to track the investment results of an index composed of South Korean equities. It provides exposure to large and mid-sized companies in South Korea and allows investors to express a single-country view. The expense ratio for this ETF is 0.57% or 0.59% according to different sources.

EWY tracks the MSCI Korea 25/50 Index, which measures the performance of the mid-cap and large-cap segments of the South Korean stock market. The fund appeals to investors seeking a short-term position in the South Korean market or targeted international equity exposure.

Over 36% of EWY's holdings are in the information technology (IT) sector, with industrials and materials stocks making up about 11.4% and 10.7% respectively. Samsung Electronics Co., SK Hynix Inc., and Samsung SDI Co. Ltd are among the fund's largest holdings.

Another option for targeted access to South Korean stocks is the Franklin FTSE South Korea ETF (FLKR). This fund tracks the FTSE South Korea Capped Index, which is composed of mid-cap and large-cap companies. FLKR has a low expense ratio of 0.09%, enabling direct access to South Korean equities at a lower price compared to alternatives. Similar to EWY, Samsung Electronics, SK Hynix, and Samsung SDI are among its top holdings.

The best indices for ETFs on South Korea

The FTSE Korea 30/18 Capped index tracks the largest stocks from South Korea. The largest company in the index is limited to a maximum of 30% of the index capitalization, with all other index components capped at a maximum of 18%.

The MSCI Korea 20/35 index tracks large and mid-cap Korean stocks. The weight of the largest constituent is constrained to 35%, and the weights of all other constituents are constrained to a maximum of 20%.

The MSCI Korea 20/35 Custom index also tracks large and mid-cap Korean stocks. The weight of the largest constituent is constrained to 35%, and the weights of all other constituents are constrained to a maximum of 20%. A buffer of 10% is applied to these limits at each index rebalancing.

The total expense ratio (TER) of ETFs on these indices is between 0.09% p.a. and 0.74% p.a.

The cheapest South Korea ETFs by total expense ratio (TER)

For investors interested in South Korea ETFs, the total expense ratio (TER) is an important consideration. Here are some of the cheapest South Korea ETFs in terms of TER:

• Franklin FTSE Korea UCITS ETF: This ETF offers exposure to large and mid-cap South Korean companies and has a TER of 0.09% p.a., making it one of the lowest-cost options available.
• Amundi MSCI Korea UCITS ETF Acc: This ETF provides access to the South Korean market with a focus on large and mid-cap stocks. While its TER of 0.15% p.a. is slightly higher than the Franklin FTSE Korea UCITS ETF, it is still considered a low-cost option.
• Xtrackers MSCI Korea UCITS ETF 1C: With a TER of 0.65% p.a., this ETF offers exposure to South Korean equities, tracking the MSCI Korea 20/35 Index.
• IShares MSCI South Korea ETF (EWY): The EWY ETF has an expense ratio of 0.57%, which is relatively higher than the previously mentioned ETFs, but still competitive compared to other options. It provides exposure to large and mid-cap Korean companies, with a focus on the information technology sector.

When considering these or any other South Korea ETFs, investors should carefully review the fund's factsheet, performance, holdings, and other relevant information to ensure it aligns with their investment goals and risk tolerance.

ETFs with South Korea exposure

There are several ETFs with exposure to South Korea, which offer broad exposure to one of Asia's largest economies. Here are some of the top ETFs with South Korea exposure:

IShares MSCI South Korea ETF (EWY)

EWY is one of the most popular South Korea-focused ETFs, with over $2.7 billion in assets under management. It tracks the MSCI Korea 25/50 Index, which focuses on the mid-cap and large-cap segments of the South Korean stock market. The fund has a value-based investing strategy and appeals to investors seeking short-term exposure to the South Korean market. EWY's holdings are primarily allocated to the information technology (IT) sector, with Samsung Electronics Co., SK Hynix Inc., and Samsung SDI Co. Ltd. as its top holdings.

Franklin FTSE South Korea ETF (FLKR)

FLKR is another popular South Korea ETF with a low expense ratio. It tracks the FTSE South Korea Capped Index, composed of mid-cap and large-cap companies, with a focus on value stocks. The fund's holdings are primarily allocated to the IT sector, followed by industrials and consumer discretionary. Similar to EWY, FLKR's top holdings include Samsung Electronics, SK Hynix, and Samsung SDI.

Direxion MSCI Daily South Korea Bull 3X Shares

This ETF provides exposure to South Korean stocks and aims to deliver three times the daily performance of the MSCI Korea 25/50 Index. It is designed for investors seeking leveraged exposure to South Korea's large and mid-cap segments.

Matthews Korea Active ETF

This ETF provides exposure to South Korean equities and is actively managed by Matthews International Capital Management. It focuses on long-term capital appreciation by investing in companies across different market capitalizations and sectors.

JAKOTA K-Pop and Korean Entertainment ETF

This unique ETF provides targeted exposure to South Korea's entertainment industry, including K-pop and other cultural exports. It is designed for investors who want to capitalize on the growth of South Korea's entertainment sector.

These ETFs offer investors diverse options to gain exposure to South Korea's economy and specific sectors, such as technology and entertainment. Each ETF has its own characteristics, such as index tracking, investment strategy, and sector allocation, allowing investors to choose the one that aligns with their investment goals and risk tolerance.

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