Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Emerging Markets ETFs
  2. Are Taiwan, South Korea and Israel Developed or Emerging Markets?
Emerging Markets ETFs
Share

Are Taiwan, South Korea and Israel Developed or Emerging Markets?

Stoyan BojinovApr 24, 2015
2015-04-24

Based on its classification system that considers (1) per capita income, (2) export diversification, and (3) degree of integration into the global financial system, the International Monetary Fund (IMF) announced more than ten years ago that Taiwan, South Korea, and Israel were classified as developed markets.

So it may come as a surprise to some investors that stocks listed in these countries account for a meaningful portion of assets in a number of emerging markets ETFs, including the iShares MSCI Emerging Markets Index Fund (EEM A-) and the Vanguard Emerging Markets ETF (VWO A).

Developed or Emerging Market?

The explanation for this apparent contradiction is rather simple, but far from satisfactory for serious investors: there is no single widely-accepted framework for determining whether a country is classified as developed, emerging, or frontier. Since being coined by Dutch banker Antioine van Agtmael in the late 1970s, the term emerging market has vaguely referred to economies with high growth expectations accompanied by high levels of risk and expected volatility.


Content continues below advertisement

taipei symbol of taiwan economy

In an IMF working paper titled What Is An Emerging Market?, author Ashoka Mody begins by highlighting the various results for a definition of emerging markets delivered by a simple Google search:

  • The market of a developing country with high growth expectations
  • Investments in these markets are usually characterized by a high level of risk and possibility of a high return
  • Emerging markets are extremely volatile, but they offer the potential to share in the early stages of a country’s economic growth
  • A sector within international stocks made up of developing countries, such as Kenya and China, where economic and political conditions may be more volatile
  • Immature securities market in which there is not a long history of substantial foreign investment
  • Markets in securities in newly industrialized countries and in countries in Central and Eastern Europe and elsewhere, in transition from planned economies to free-market economies and in developing countries with capital markets at an early stage of development

“The countries listed in these definitions range from Kenya with a per capita income of $350 in 2000 to Mexico with per capita income just above $5000,” writes Mody. “What is common across them? Good growth prospects appear desirable, but may reflect wishful thinking since only a handful of developing countries have grown at consistently higher rates than advanced economies.”

See also Is Annual GDP Growth a Good Predictor of Single-Country ETF Returns?.

Diverging Definitions

Almost all benchmark providers agree on the status of the BRIC economies – Brazil, Russia, India, and China – as the “core” emerging markets that make up a significant majority of total asset allocations. But beyond these four countries, discrepancies begin to arise in emerging markets classification systems.

Dow Jones, for example, excludes Hong Kong and South Korea, instead giving greater weight towards the BRIC economies. As such, ETFs based on Dow Jones emerging markets benchmarks (i.e., those offered by Emerging Global Advisors) may be more “pure play” funds, excluding those economies that border between developed and emerging status.

Three of the primary methodologies most often used include:

  • Dow Jones: Based on classifications made by the International Monetary Fund, Dow Jones Indexes will update a country’s classification within 18 months of after the IMF announcement.
  • FTSE: The FTSE Group divides emerging markets into advanced emerging and secondary emerging markets to provide for “greater granularity and to provide a transparent system on the monitoring of emerging market criteria through a country review process.” Currently, advanced emerging countries include Brazil, Hungary, Mexico, Poland, South Africa, and Taiwan. Sixteen countries are classified as “secondary emerging.”
  • MSCI: According to the MSCI classification system, there are currently 22 emerging markets, including Taiwan.

Pure Play ETF Options

For investors looking to make a “pure play” on emerging markets, exposure to quasi-developed economies such as Taiwan and South Korea might not be so desirable. Both of these markets seem to fall much closer to the U.S. on the development spectrum than true emerging markets such as China and Brazil. The following comparison of per capita GDP, literacy rates, life expectancy, and Human Development Index score show the differences between these “borderline-developed” economies and the major components of the BRIC bloc, China and Brazil.

CountryPer Capita GDPLiteracy RateLife Expectancy (years)HDI
South Korea$25,97699.0%81.370.891
Taiwan$31,90098.3%79.120.882
Israel$36,05197.1%81.700.888
China$6,80795.1%75.200.719
Brazil$11,20895.8%73.620.744
U.S.$53,04199.0%78.740.914

As the above statistics show, South Korea, Taiwan, and Israel seem much more closely aligned with the U.S. when it comes to developed status than they do with Brazil and China.

Read more about emerging markets and the opportunity they offer to investors — be sure to also see ETFdb.com’s complete List of Emerging Markets ETFs.

The Bottom Line

Emerging markets offer an unparalleled opportunity over the long-haul for anyone willing to stomach the inherently high levels of volatility associated with this asset class. It’s important that investors take their time to look under the hood before making an allocation as there can often times be important differences between seemingly-identical products. Always do your research so that you may uncover any limitations before you’ve committed your capital to any one product in particular.

For more ETF analysis, make sure to sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.

» Popular Pages

  • Tickers
  • Articles

May 26

Invest in Research as COVID-19 Heart Impacts Increase

May 26

This ETF Gives Exposure to the Next Gen Nasdaq Leaders

May 26

Innovator Offers Upside With a Floor on Downside Risk

May 26

A Guide to the Advantages, Tradeoffs, and Risks of TIPS

May 26

Pacer’s Cash Cows Milk $6 Billion From Its Investors

May 26

SATO and BLKC Impacted as Bitcoin Miners Rebound

May 26

There's More to Crypto than Just Currency

May 26

Sentiment for Bonds Could Improve: An ETF to Consider

May 26

BondBloxx Launches 3 High Yield Corporate Bond ETFs

May 26

ARK’s Cathie Wood: Now’s Not the Time to Bet Against Disruptive Innovation

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

ARKK

ARK Innovation ETF

VTI

Vanguard Total Stock Market...

XLE

Energy Select Sector SPDR...

WEAT

Teucrium Wheat Fund

DBA

Invesco DB Agriculture Fund

TQQQ

ProShares UltraPro QQQ

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X