Though it might be rough trading in the emerging market space, the fact has not deterred issuers from filing or launching new products. While iShares had filed for some funds focused on the emerging markets last month, Horizons has now introduced a fund focused on Korea.
Launched on March 4, 2014, the new product – Horizons Korea KOSPI 200 ETF under the symbol of HKOR – is the first country-specific ETF by the issuer in the U.S. (Emerging Market ETFs: Any Bright Spots?).
HKOR in Focus
The new passively managed fund seeks to track the performance of KOSPI 200 Index – a free-float-adjusted, market-capitalization-weighted index, before fees and expenses.
The index consists of 200 blue chip companies listed in the Korea Exchange ("KRX"). KOSPI 200 Index is the most broadly diversified Korean benchmark. The index uses various factors including market and sector representation as well as liquidity of the stocks to determine the weightings of individual securities in the basket. HKOR charges 38 basis points as fees to investors.
How could it fit in a portfolio?
The ETF provides investors with a good avenue to invest in Asia's fourth largest economy. The Korean stock market is believed to be the least volatile among other emerging market nations (read: Is the Worst Over for These Emerging Market ETFs?).
South Korea has one of the strongest economies with a strategic geographical location and the ability to produce sophisticated goods at a cheaper rate. Some of the leading global brand names, such as Samsung, LG Electronics and Hyundai are based out of Korea.
Though various factors including the Fed taper, fiscal and current account deficits and political uncertainty are plaguing the emerging markets, Korea is one such emerging market nation with a lower dependence on foreign funds, sound economic fundamentals and strong policy frameworks. As such, the fund might be a good bet for investors wanting to target the emerging market space.
Moreover, emerging markets offer significant diversification benefits to developed market investors, and especially for those who have a U.S.-centric portfolio.
ETF Competition & Bottom Line
There are very few ETFs focused in this corner of the investing world. While iShares MSCI South Korea Capped ETF EWY dominates this corner, WisdomTree Korea Hedged Equity Fund (DXKW), First Trust South Korea AlphaDEX Fund FKO and the db X-trackers MSCI South Korea Hedged Equity Fund (DBKO) are some of the other funds listed in this space (see all the Asia-Pacific ETFs here).
Though EWY manages an asset base of over $4 billion, the rest of the funds have an asset base of under $10 million.
EWY tracks the MSCI Korea Index, holding a basket of 105 stocks. The fund looks quite heavily concentrated in its top 10 holdings, which form almost 50% of the fund's total assets. Samsung Electronics dominates the fund with one-fifth of the total assets, followed by Hyundai Motor (5.9%) and Hyundai Mobis (3.48%).
Sector wise, the top two sectors, Technology (33.39%) and Consumer Cyclical (16.03%), together form around 50% of the fund's total assets.
Though EWY delivered flat returns in the last one year, the fund has returned a compounded 6.26% in the last three years, and 208% in the last five years. However, the product is pricey compared to HKOR, charging investors 59 basis points as fees (read Best ETF Strategies for 2014).
As such, the newly launched fund might face stiff competition from EWY. However, investors should keep in mind that HKOR is a comparatively cheaper option to gain exposure to the Korean equity markets.
Also, the newly launched fund gives investors a greater diversified exposure to Korean stocks as it holds almost double the number of stocks held by EWY, suggesting that this new Horizons fund could be a tough competitor to the market leader from iShares.
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DB-XT MS SK HEF (DBKO): ETF Research Reports
WISDMTR-KR HE (DXKW): ETF Research Reports
ISHARS-S KOREA EWY: ETF Research Reports
FT-S KOREA AD FKO: ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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HKOR in Focus
The new passively managed fund seeks to track the performance of KOSPI 200 Index – a free-float-adjusted, market-capitalization-weighted index, before fees and expenses.
The index consists of 200 blue chip companies listed in the Korea Exchange ("KRX"). KOSPI 200 Index is the most broadly diversified Korean benchmark. The index uses various factors including market and sector representation as well as liquidity of the stocks to determine the weightings of individual securities in the basket. HKOR charges 38 basis points as fees to investors.
How could it fit in a portfolio?
The ETF provides investors with a good avenue to invest in Asia's fourth largest economy. The Korean stock market is believed to be the least volatile among other emerging market nations (read: Is the Worst Over for These Emerging Market ETFs?).
South Korea has one of the strongest economies with a strategic geographical location and the ability to produce sophisticated goods at a cheaper rate. Some of the leading global brand names, such as Samsung, LG Electronics and Hyundai are based out of Korea.
Though various factors including the Fed taper, fiscal and current account deficits and political uncertainty are plaguing the emerging markets, Korea is one such emerging market nation with a lower dependence on foreign funds, sound economic fundamentals and strong policy frameworks. As such, the fund might be a good bet for investors wanting to target the emerging market space.
Moreover, emerging markets offer significant diversification benefits to developed market investors, and especially for those who have a U.S.-centric portfolio.
ETF Competition & Bottom Line
There are very few ETFs focused in this corner of the investing world. While iShares MSCI South Korea Capped ETF EWY dominates this corner, WisdomTree Korea Hedged Equity Fund (DXKW), First Trust South Korea AlphaDEX Fund FKO and the db X-trackers MSCI South Korea Hedged Equity Fund (DBKO) are some of the other funds listed in this space (see all the Asia-Pacific ETFs here).
Though EWY manages an asset base of over $4 billion, the rest of the funds have an asset base of under $10 million.
EWY tracks the MSCI Korea Index, holding a basket of 105 stocks. The fund looks quite heavily concentrated in its top 10 holdings, which form almost 50% of the fund's total assets. Samsung Electronics dominates the fund with one-fifth of the total assets, followed by Hyundai Motor (5.9%) and Hyundai Mobis (3.48%).
Sector wise, the top two sectors, Technology (33.39%) and Consumer Cyclical (16.03%), together form around 50% of the fund's total assets.
Though EWY delivered flat returns in the last one year, the fund has returned a compounded 6.26% in the last three years, and 208% in the last five years. However, the product is pricey compared to HKOR, charging investors 59 basis points as fees (read Best ETF Strategies for 2014).
As such, the newly launched fund might face stiff competition from EWY. However, investors should keep in mind that HKOR is a comparatively cheaper option to gain exposure to the Korean equity markets.
Also, the newly launched fund gives investors a greater diversified exposure to Korean stocks as it holds almost double the number of stocks held by EWY, suggesting that this new Horizons fund could be a tough competitor to the market leader from iShares.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
DB-XT MS SK HEF (DBKO): ETF Research Reports
WISDMTR-KR HE (DXKW): ETF Research Reports
ISHARS-S KOREA EWY: ETF Research Reports
FT-S KOREA AD FKO: ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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