Exchange Traded Funds (ETFs)

Consider Exposure to Korean Growth

This week’s column gives an overview of the iShares MSCI South Korea Capped ETF (EWY), a single-county exchange-traded fund (ETF) that provides exposure to a selection of large- and mid-cap South Korean companies.

As with most investments that are oriented towards South Korea, this fund has a very large position in Samsung, which is headquartered near the country’s capital city of Seoul. Indeed, more than 20% of EWY’s assets are allocated to Samsung, which plays a significant role in South Korea’s economy.

For that reason, any potential investors in this fund should be comfortable with investing in Samsung, which made the unprecedented decision in October to recall all of its Galaxy Note 7 smartphones after some of them spontaneously burst into flames during use.

Investors who are undeterred by the fallout from that news and interested in gaining exposure to Samsung shares as they recover can avoid paying international security fees by investing directly in EWY. Plus, EWY does offer a fair degree of diversity, as the index this fund tracks contains 107 stocks.

In terms of EWY’s sector weightings, the largest group is technology at 38%, followed by financial services, consumer cyclicals and industrials.

In the course of the past 52 weeks, EWY has risen 17.5%. This rise beats U.S. domestic markets and shows the potential of emerging markets to post big gains. EWY’s double-digit percentage return also means that EWY outperformed many other emerging market funds this year. In total, EWY has more than $3 billion in assets, and its expense ratio of 0.62% is normal for a single-country fund. Its dividend yield of about 2% is paid out annually.

Exclusive ETF Talk: Strike Oil While the Market’s Hot!

View the current price, volume, performance and top 10 holdings of EWY at ETFU.com.

The fund’s top five holdings are Samsung Electronics Ltd., 23.09%; SK Hynix Inc., 4.01%; Naver Corp., 3.19%; Hyundai Motor, 3.12%; and Shinhan Financial Group Ltd., 2.92%. The top 10 holdings comprise 47.88% of assets.

During the past 30 years, South Korea has surged massively to become a global leader in technology. If you believe this growth may continue, you may wish to consider what the iShares South Korea Capped ETF (EWY) can offer.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/