In a mostly glum year for single-country emerging markets exchange traded funds, the iShares MSCI South Korea Capped ETF (NYSEArca: EWY) is something of a standout even with a loss of 1.7%.
EWY, one of the largest country-specific ETFs of any type with almost $4.4 billion in assets under management, has been a stout performer over the past six months. Over that time, investors have embraced low valuations on South Korean shares even after bankers and policymakers there acknowledged the two primary risks facing Asia’s fourth-largest economy are a weak Japanese yen and the specter of Federal Reserve tapering. [South Korea Bull Stampedes as Investors Rush In]
EWY has been bolstered by strong fundamentals over the past few months, but seem an alluring technical picture regarding the ETF.
“Notice that EWY is attempting to set its first ‘higher low’ since pulling back in off the swing high in October. Over the next week or two, we would like to see the price action tighten up around the 50-day moving average, which would present us with a low-risk buy entry point,” writes Deron Wagner of Morpheus Trading Group.
Wagner goes on to note that EWY has formed “a base of consolidation” near the highs of 2012.
“The current base is seven weeks old, and for the most part has held above the 10-week moving average (similar to the 50-day moving average). From here, a breakout above the high of the seven-week base should produce enough bullish momentum to take out the highs of 2012,” he said.
Investors have choices beyond FKO when it comes to accessing South Korea via ETFs. The First Trust South Korea AlphaDEX Fund (NYSEArca: FKO) is the smart beta play on the country while the new WisdomTree Korea Hedged Equity Fund (NasdaqGS: DXKW) is the first won-hedged alternative. [South Korea ETF Showdown]
FKO has gained more than 11% over the past six months while DXKW is off 2% since its early November debut.
iShares MSCI South Korea Capped ETF
ETF Trends editorial team contributed to this post.