South Korea is one of the largest economies in Asia, and with a highly advanced technology sector. We analyze the 4 most important stock market indexes in South Korea.
When we think of large Asian economies, we all think of China and Japan, the second and third largest economies in the world, respectively.
But the country we think about next is precisely the one that is geographically located between those two: South Korea. With more than 50 million people and a GDP per capita similar to that of Japan, South Korea is a country that matters a great deal for the global economy.
Additionally, it has some internationally renowned corporations. The most famous of these are Samsung, Hyundai, Kia, and LG Electronics.
We must also emphasize that the weight of the technology sector within the economy and stock indexes of South Korea is remarkable. In fact, almost 50% of its market capitalization is concentrated in technology companies.
Throughout this post we will use Korea and South Korea interchangeably. As most of you will know, its northern neighbor does not have a stock market in which we can invest.
In the next few sections, we will analyze the most important stock indexes in South Korea. This will allow you to look for an ETF to invest in the country passively without having to analyze individual companies one by one.
The KOSPI is the most famous stock index of the Korean stock exchange, and the one that receives the most attention from the financial press, so perhaps the name already sounds familiar to you.
KOSPI is owned by Korea Exchange, the operator of Korea’s two largest stock exchanges in Seoul and Busan.
Introduced in 1983, the index is composed of all stocks listed in the main category of the Korean stock exchange. It is, therefore, a very diversified index, with about 900 companies.
Because it has such a large number of stocks, the KOSPI is difficult to replicate through an ETF. The next index we analyze is much more suited for passive investments.
You will find additional details about the KOSPI on its official website.
The KOSPI 200, as its name suggests, is a stock market index composed of 200 of the largest listed companies in South Korea.
The KOSPI 200 includes some large conglomerates. And, because these conglomerates are often made up of several companies, we will see several stocks with the same name.
An example could be Samsung, represented by Samsung Electronics, Samsung Biologics and Samsung SDI, among others.
Within the index, stocks are weighted based on their market capitalization. As a result, larger companies have a greater weight and significantly influence the behavior of the index.
As we have mentioned, thanks to the smaller number of stocks that make up the KOSPI 200, it will be very easy for us to find an ETF that tracks this index.
The FTSE Korea is a stock market index owned by FTSE Russell, a subsidiary of the London Stock Exchange.
It is composed of companies with large and medium market capitalizations. The exact number of stocks within the index fluctuates over time but is usually around 100.
Because companies are weighted according to their market capitalization, the correlation of the FTSE Korea with the KOSPI 200 is very high.
Therefore, the FTSE Korea can be a good alternative for those who want to invest passively in South Korea.
The MSCI Korea is the other index that we can look for if we want to invest in this Asian country.
Owned by the US company MSCI, this index is composed of all South Korean stocks that are part of the MSCI Emerging Markets World Index. The exact number of shares in the index fluctuates over time but is usually around 100.
The reason South Korea is part of the emerging markets index is not because of its level of economic development. In fact, South Korea is richer than many of the countries in the developed category.
Some index providers still classify Korea as an emerging country because its financial markets are not as open as those of most developed countries. Something similar happens with some very wealthy countries in the Middle East.
However, because the MSCI Korea is only composed of Korean companies, it really does not matter if they are in the world index of developed or emerging countries.
If you want to find additional information about this index, here is the link to the official website of MSCI.
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