By Alison Cordeiro Sousa – Student of the International Relations course and Researcher at the Asian Business Studies Center (GIRL / ESPM)
South Korea combines stability and rapid economic growth rates, what is rare, that is, attracting international investors seeking higher returns. Korea has the 10th largest economy in the world, with a value of 1,6 trillions of dollars. Korea's economic fundamentals are solid, with its commercial volume in 9th place in the world from 2020, and with the 8th largest foreign exchange reserve in the world as of July 2021(International Trade Administration U.S. Department of Commerce, 2021). The country's economy is quite stable and capable of supporting the operation and continuous growth of the business. Despite the effects of the COVID-19 pandemic, the Organization for Cooperation and Development (OECD), predicted 4% of economic growth for Korea in 2021.
This scenario makes Korea very attractive for investments, in particular, the results of the stock market such as the Exchange Trade Fund have been highlighted. (ETF), are special investment funds that have as a reference, some stock exchange index, like the Bovespa index (BOVA11) No brazil, in South Korea there is the Korea Composite Stock Price Index (KOSPI) ou The MSCI Korea 25/50 Index. Backgrounds are special, because they are made up of a basket of shares from different companies, different from traditional investment funds. No brazil, for example, buy an ETF, means to acquire a set of shares, logo, instead of getting just one share like Petrobras (PETR4.SA) or Itaú (ITSA4.SA), browsing Home Broker, platform used by investment brokers to view the stock market, and search for the code of your ETF to purchase the set of preferred shares.
ETFs replicate some stock exchange index strategies. Like for example, when we see that the KOSPI or BOVA11 index, increased or decreased, we are saying that the stock market that are part of the indices, enlarged or reduced. Unlike traditional funds that people often value share for share, financial reports of various companies and buy all these shares, hundreds or thousands of times. Thereby, some ETFs facilitate investor portfolio management, as KOSPI 200 which has almost the same valuation as the KOSPI index. Since the ETF- KOSPI 200, ready 200 shares of major South Korean companies, with emphasis on the technology sector. Then, if the KOSPI index is rising 2%, o ETF – KOSPI 200, will rise very close to that.
In the South Korean stock market we have highlights for some ETFs, which are more profitable than BOVA11, como iShares MSCI South Korea Index ETF (EVE), Direxion Daily MSCI South Korea Bull 3X Shares ETF (KORU) e Franklin FTSE South Korea ETF (FLKR). South Korea's largest ETF is the iShares MSCI South Korea ETF (EVE) with about $ 6 billions in assets. in the last consecutive year, South Korea's best performing ETF was KORU with 37,91% (Yahoo Finance, 2021). And with more than $ 65,02 millions in assets(Franklin Templeton, 2021)., the most recent ETF launched in South Korean space was the Franklin FTSE South Korea ETF (FLKR) in 2017.
Featured major Korean ETFs, now comes the question, why these listed ETFs are worth more than the BOVA11? The reason is that, or Kospi index, went up 30,8% in 2021, its biggest annual jump in over a decade. The iShares MSCI South Korea ETF (EVE) grown up 38,4% in 2020, surpassing the accumulated earnings as the S&P 500 In the USA. And FLKR had a return of 29,7% last year and 8,9% a year for the last three years (Imbert, 2021). Different from BOVA11, which last year had a high of only 2,92% and being one of the only assets on the Brazilian stock exchange, which can be rented twice, but this only favors investors with large sums of capital and generally the commissions charged are high.. Then, a Shinhan Financial Investment, South Korea's second largest bank company, already offers peer-to-peer stock loans (P2P) via blockchain, for investors to be able to lend their shares more easily and cheaply, directly to other individuals, getting a fee in exchange for the loan.
For a short term payback, o EWY e KORU, seem to be the best options. For example, KORU is a more aggressive one-day bet on South Korean stocks. The fund aims to deliver 3x the performance of MSCI Korea 25/50 Index. And the fund rebalances its leverage daily, if kept for longer periods, the combined effects of daily imbalance can lead to significant differences in the trajectory of expected returns. Besides that, have high liquidity and above-average profitability in emerging and developed markets. And for those who think about long-term profitability, FLKR attracts for its low expense rate, allowing investors direct access to South Korean stocks at a competitive price. And its market index has remained constant, no big losses, how was last year.
And finally, the South Korean stocks, measured by the MSCI Korea index, outperformed the broader US market for a period of 12 months, with a total return of 48,3% compared to the total return of the S&P 500 of 36,2%, in 5 August 2021 (Investing, 2021). Logo, o S&P 500, which lists the 500 biggest US companies, como Apple, Microsoft, JP Morgan, e etc. It has a lower profitability compared to MSCI Korea, so of course investing in the Korean market is being more favorable to a return., than investing in the world's leading stock market, the american or even in Brazil.
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