In a year of strength for emerging markets equities and exchange traded funds, tactical investors have not needed to take on excessive risk to profit with single-country ETFs. Just look at the Deutsche X-trackers MSCI South Korea Hedged Equity ETF (NYSEARCA:DBKO).
That currency hedged spin South Korea stocks is up more than 23% year-to-date and raced to another record high on Thursday.
DBKO “seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Korea 25/50 US Dollar Hedged Index. The index is designed to provide exposure to South Korean equity markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and the South Korean won,” according to Deutsche Asset Management.
The low energy prices and cheap financing have also supported investor sentiment and positive outlook for earnings growth ahead. Tech companies, such as Samsung Electronics, are leading hopes of a turnaround in earnings. South Korea is Asia’s fourth-largest economy behind China, Japan and India and is one of the most advanced emerging markets.
“The overall pace of economic growth had improved slightly in most regions of the country during the April-June period, according to an assessment from the Bank of Korea’s 15 regional offices nationwide,” reports Reuters, citing the Bank of Korea. “Manufacturing is forecast to steadily improve in coming months due to higher shipments of semiconductors, display and petrochemical products, while services will gain from an increase in inbound tourists and freight, the report said.”
Currently, South Korea’s benchmark Kospi is on a six-session winning streak and resides at all-time highs. DBKO holds 114 stocks and reflects South Korea’s status as a technology hub with about 38.5% of the ETF’s roster in technology stocks. Financial services and consumer discretionary names combine for 26.5% of the ETF’s weight.
DBKO’s ascent and recent string of new highs is all the more impressive when considering the won recently touched a multi-week high against the dollar. Over the past 12 months, DBKO has outpaced the MSCI Emerging Markets Index by about 700 basis points.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.