Sep 26 2014

A Guide To Secret ETFs Buying South Korea

South Korea is home to a few of the biggest worldwide players in technology and heavy industry. Some recognize names such as Samsung Electronic devices Co., Ltd. (SSNLF) while others such as POSCO (PKX), the worlds largest steel maker, make fewer headlines but are no less essentiallesser to the international economy. The country of 50 million is the fourth-largest economy in Asia, behind China, Japan, and India.

Focus on EWY

On that basis it can be an appealing target for investors who desirewish to do certain country plays, though such techniques have the tendency to be niche, according to Morningstar, Inc. (MORN) Senior citizen Analyst Patricia Oey. There is only one ETF of any size that focuses on South Korea: the iShares MSCI South Korea Capped (EWY), with 4.7 billion under management. The others are rather little, and as such, can be unstable. Some are in danger of being terminated.

Oey kept in mind that since exports are such a huge part of the South Korean economy, the stock indices there have the tendency to follow worldwide trends. That can be seen in their year-to-date efficiency. Over the last five years, the returns of the South Korea ETFs don’t really beginbegin to diverge from the United States indices till the beginning of 2013, as well as then they track the FTSE relatively carefully. Taking a look at the year-to-date numbers (to Sept. 5) reveals a roughly similar pattern, with the US markets generating 8.61 % on the NASDAQ and 9.73 % from the Samp; P, while EWY only struck the 0.63 % mark and the FTSE returned a similarly anemic 1.57 %.

EWYs Parts

So whats in EWY? Its great holdings are Samsung Electronics Co. Ltd., Hyundai Motor Co., SK Hynix Inc., POSCO and Shinhan Financial Group (SHG). Of those, only Shinhan is concentrated on the Korean market (its a customer bank). Samsung, SK Hynix, Hyundai and POSCO are all export-oriented, given that the very first two are in technology, Hyundai is in automobiles, and POSCO is a steel manufacturer. Youll notification that numerous of those business lack tickers; thats because they trade on the Korea Exchange (KRX) and not on an U.S exchange (the tickers provided are for American depositary receipts (ADR). (For even more, see: The best ways to Invest in Samsung.)