The KRW (Lyxor) tracker replicates the MSCI Korea index of the 114 main Korean stocks. It is therefore a rather deep index, but this ETF quoted in Euro on Euronext is very focused on technology that weighs 40% of the capitalization, but even more, a value, Samsung, weighs for 27% of the index. The other main sectors are finance (12%), consumer goods (11%), industry (8%) and mining (8%). The top 10 stocks weigh a little more than 50% or about 25% off Samsung.
This tracker naturally embeds the risk related to the country's currency, the Won (which means "round" in Korean), more volatile than the reference currencies, but the big companies like Samsung realize almost all of their business in the USA, China or Europe and have ultimately limited exposure to the Won.
The ETF fee is 0.45%. The AUM of the Fund is € 105millions.
Alternative ETFs: EWY (iShares in USD)
Index profile
Korea ranks 11th in terms of GDP ($ 1400bn) between Russia and Canada ; the country has experienced spectacular growth over the last 30 years, yet its strong exposure to finance and global trade hit it hard during the 2008 financial crisis. Its economy was one of the worst affected in the Asia-Pacific area, however, South Korea was also one of the first to rebound thanks to exports and fiscal stimulus.
In 2017, in the context of rising tensions with North Korea, South Korea has awarded a record amount to defense, but the budget also aims to support job creation and develop the health system. The country faces structural problems such as the under-sizing of the financial market, the aging of the population, export dependence and the erosion of the country's competitiveness in the face of the Chinese economy's ramp up.
The country's main sectors of activity are textiles, the steel industry, automotive manufacturing, shipbuilding and electronics. South Korea is the world's largest semiconductor producer (including major smelters). The country's trade balance has been largely in surplus since February 2012 and is expected to remain so for the next few years, while the country's main trading partners are China, Japan, the European Union and the United States.
Korea is a major player in global technology with leading players, which gives it strong growth potential but at the same time is dependent on complex geopolitical issues stemming from bad relations with Japan (because of war), China (because of its military alliance with the US) and of course North Korea, which threatens it with a nuclear strike.
The index remains very dependent on the technology sector, and as such very correlated to the Nasdaq, although less bullish for some time because of the chaotic path of Samsung threatened by Huawei in Asia and Europe.
