South Korea ETFs Could Shoot Higher

May 14th at 10:00am by Todd Shriber

As emerging markets exchange traded funds have rebounded, some of the more impressive single-country funds have also been among the more volatile offerings.

Take the examples of the WisdomTree India Earnings Fund (NYSEArca: EPI) and the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ). Brazil and India are, historically, two of the more volatile emerging markets, but EPI and EWZ are easily two of the best BRIC single-country ETFs this year and by wide margins over comparable China and Russia funds. [India ETFs in Focus on Election Results]

That does not mean investors should eschew lower beta emerging markets fare such as South Korea and Taiwan. Actually, investors have not been passing on those highly advanced developing markets.

Since the start of April, the iShares MSCI South Korea Capped ETF (NYSEArca: EWY) has taken in over $40 million in new assets. Over the past 90 days, EWY, the largest South Korea ETF by assets, has jumped 7.3%. [Opportunity With South Korea ETFs]

Some technicians see significant upside ahead for EWY.

“EWY is showing some great technical action here after taking out a downtrend line in place since last fall and then working its way out of a bullish wedge,” according to Captain John Charts.

EWY’s preliminary price objective on the point and figure chart is $77, according to Captain John Charts. That compares with a Tuesday close just over $64.

Investors have options in addition to EWY when it comes to South Korea ETFs. One of them is the Horizons Korea KOSPI 200 ETF (NYSEArca: HKOR) which has gained 4.6% since its early March debut.

HKOR is the only U.S.-listed South Korea ETF that acts as a proxy for the Kospi 200, South Korea’s equivalent of the S&P 500. The Kospi 200, HKOR’s underlying index, is the most widely used Korean stock benchmark used in Korea, as well as the rest of Asia. [A New Way to South Korea With ETFs]

That means HKOR holds 200 stocks, slightly less than double the amount held by EWY. Both ETFs can be considered avenues to express less-than-cheery views on Apple (NasdaqGS: AAPL) as Samsung accounts for nearly 23% of HKOR and 22.1% of EWY.

iShares MSCI South Korea Capped ETF

ewy

Chart Courtesy: Captain John Charts

Tom Lydon’s clients own shares of Apple.

Tickers

EWY HKOR