South Korea ETFs In Focus On $10 Billion Stimulus

South Korea’s newly formed government, led by Moon Jae-in, is on track to deliver on one of its key campaign promises, that of boosting job growth and tackling unemployment threat, which the country faces (read: Can South Korea ETFs Continue to Surge after Presidential Election?).

Although Asia’s fourth-largest economy grew 1.1% in the first quarter of 2017, its unemployment rate is alarming. It rose to 4% in April 2017 from 3.7% a month earlier. Moreover, the unemployment rate for the country’s youth was 11.3% in April 2017, unchanged from the previous month.

A fiscal stimulus package of 11.2 trillion won ($10 billion) was announced on Monday, June 5, 2017. As per Reuters, approximately 5.4 trillion won will be pumped in to create public sector jobs and another 2.3 trillion won will be utilized as subsidies for maternity leaves and health care for the elderly. The government expects the additional spending to add over 71,000 public sector and 15,000 private sector jobs (read: South Korea ETFs in Focus on Rising Military Tensions).

However, considering that Moon holds a minority stake in the government, with just 40% of the 299 seats, passing the bill will not be an easy affair, as he has to gain support from more than 10% members from the opposition parties. Moreover, members of both Bareun Party and Liberty Korea Party, the two main political parties in the opposition, have criticized this fiscal stimulus package as unsustainable.

There is still high uncertainty surrounding the bill as members of the opposition have to be convinced about the feasibility of the plan. Let us now discuss a few ETFs focusing on providing exposure to South Korea (see all Asia-Pacific (Developed) ETFs here).

iShares MSCI South Korea Capped ETF EWY

This fund is the most popular in the space offering exposure to South Korean equities.

It has AUM of $3.61 billion and charges 64 basis points in fees per year. Information Technology, Financials, and Consumer Discretionary take the top three spots with 36.55%, 14.23%, and 13.84% allocation, respectively (as of June 1, 2017). Samsung Electronics (KS:005930) Ltd, Sk Hynix Inc, and Hyundai Motor are the top three stocks with 21.92%, 4.18%, and 3.24% allocation, respectively (as of June 1, 2017). The fund returned 31.89% in the last one year and 29.01% in the year-to-date time frame (as of June 2, 2017).

AdvisorShares KIM Korea Equity ETF (TO:KOR)

This fund seeks to offer exposure to South Korean growth equities in the mid-to-large cap segment.

It has AUM of $10.16 million and is relatively expensive as it charges 99 basis points in fees per year. Information Technology, Industrials, and Consumer Discretionary take the top three spots with 29.7%, 19.3%, and 10.7% allocation, respectively (as of April 30, 2017). Samsung Electronics Co Ltd, Naver Corp, and CJ CheilJedang Corp are the top three stocks with 20.03%, 4.02%, and 3.23% allocation, respectively (as of April 30, 2017). The fund returned 23.13% in the year-to-date time frame (as of June 2, 2017).

First Trust South Korea AlphaDEX Fund FKO

This fund seeks to employ quantitative-based screening techniques to identify stocks poised to generate great alpha.

It has AUM of $5.44 million and is relatively expensive as it charges 80 basis points in fees per year. Industrials, Financials, and Consumer Discretionary occupy the top three spots with 19.43%, 18.87%, and 16.41% allocation, respectively (as of June 2, 2017). SK Holdings Co. Ltd., Hanwha Chemical Corp, and LG Uplus Corp are the top three stocks with 3.65%, 3.46%, and 3.34% allocation, respectively (as of June 2, 2017). The fund returned 18.07% in the last one year and 25.05% in the year-to-date time frame (as of June 2, 2017).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>