Can South Korean ETFs Survive The Covid-19 Havoc?

Coronavirus has so far spread to around 28 countries. The death toll has risen to 2,619 globally along with 79,565 confirmed cases. While Kuwait and Bahrain reported their first cases, a surge in the Covid-19 cases has been observed in South Korea, Japan and Italy as well (read: Coronavirus Puts These Country ETFs on High Alert).

In fact, South Korea has been affected the most apart from mainland China. The country has witnessed more than 700 new cases in less than a week as a range of infections emerged from a religious group in the southern city of Daegu. Accordingly, South Korean president Moon Jae-in has raised its nation's threat level to the highest "red alert" for the first time since 2009. This will allow government authorities to limit public activities.

Will Covid-19 Dent Economic Recovery?

The coronavirus epidemic is expected to slow down South Korea’s economic recovery that had begun in late-2019. In fact, First Vice Minister Kim Yong-beom commented that the outbreak is causing “large concern that it will limit the trend of economic recovery started late last year.” He has expressed concerns on slowing exports to China and weakening domestic consumption. Notably, South Korea has seen a drop in imports from China of 19% in the first 20 days of February. Going on, South Korea’s largest technology company, Samsung Electronics (KS:005930) Co. had to temporarily shut down its operations at a plant in Gumi City over the weekend as one of its employees had tested positive for the deadly virus. Also, the country’s currency won sunk to a six-month low after the raising of the disease alert level.

However, it is being speculated that the Bank of Korea will opt for easing monetary policies by lowering its benchmark interest rate at its regularly scheduled meeting on Feb 27. The government might also introduce extra budget along with other measures to support the economy (read: ETF Areas That Can Stay Strong Amid Covid-19 Outbreak).

Against this backdrop, let’s take a look at the following ETFs:

iShares MSCI South Korea ETF EWY

The fund provides exposure to large and mid-sized companies in South Korea. It tracks the MSCI Korea 25/50 Index. It holds a basket of 111 stocks and charges a fee of 59 basis points. It has an AUM of $4.50 billion. The fund trades in daily average volumes of about 3.3 million shares. It has a Zacks Rank #3 (Hold) with a Medium risk outlook. The fund has lost 6.1% in the year-to-date period and 9.8% in the past year.

Franklin FTSE South Korea ETF FLKR

The fund seeks to deliver investment results that closely correspond, before fees and expenses, to the performance of the FTSE South Korea Capped Index by providing targeted exposure to large- and mid-sized companies in South Korea. It holds a basket of 140 stocks and charges a fee of 9 basis points. It has an AUM of $14.3 million. The fund trades in poultry daily average volumes of about 5,000 shares. It has a Zacks Rank #3. The fund has lost 6.8% in the year-to-date period and 10.1% in the past year.

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