U.S. investors may be wary of domestic equities right now, and they’d have good reason, given how overvalued they are. Market watchers in the U.S. may be waiting for the other shoe to drop from the Fed or a possible earnings recession, but they can take that anxious energy and spend it better by looking abroad to South Korea. The East Asian country has an interesting case for success this year, available in a low-fee South Korea ETF like the Franklin FTSE South Korea ETF (FLKR ).
Why South Korea? The country is just one of several poised to benefit from a reopening of China’s economy as that nation loosens its zero-COVID rules and invests to reignite its economic growth. South Korea itself recently launched its own domestic tax break measures designed to support economic growth specifically in the semiconductor industry, a key piece of its export business landscape.
With semiconductors playing such an important role, it’s important to consider how that space looks this coming year. The end of the shortage of semiconductors appears to be in sight for 2023, with only 20% of industry survey respondents saying that a shortage would last past this year. Furthermore, 81% of industry leaders responding to the survey from KPMG said they believe their company’s revenue will grow in the coming year.
FLKR’s performance has reflected the investment case in its performance, as well. The South Korea ETF tracks the FTSE South Korea RIC Capped Index and has outperformed its ETF Database category average over the last three months, returning 28% in that time compared to 17.4% for the average. The strategy charges just nine basis points and has also taken in $83.5 million in net inflows over just the last five days.
Investors in the U.S. may be looking away from overvalued U.S. equities and towards foreign markets. With rising rates and a possible recession looming, those investors may want to look to South Korea specifically via FLKR as an option to consider in the nascent new year.
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