South Korea an EM winner
South Korea has been identified as a beneficiary of the COVID-19 pandemic with returns over the past year of three times as much as the wider emerging market index.
Franklin Templeton emerging markets team said the country had been making innovations in the healthcare sector which was helpful in the fight against COVID-19.
“South Korea’s advantages in innovation and intellectual property are also evident in the health care sector—ranging from virus test kits to biologics—which have undoubtedly been supportive during this crisis. The country’s internet sector has also been thriving amid social distancing,” Franklin Templeton said.
According to FE Analytics, the MSCI South Korea index returned 24% over one year to 11 August 2020, compared to returns of 8% by the MSCI Emerging Markets index.
Within the Australian Core Strategies universe, the average emerging market fund had returned 3.3%.
Performance of MSCI Korea versus MSCI emerging markets over one year to 10 August 2020
Since the start of 2020, MSCI Korea had seen positive returns of 3.6% versus losses by the index of 2.5%.
Out of the 47 emerging market funds in the ACS universe, only five held exposure to Korea. These were Fidelity Global Emerging Markets, GQG Partners Emerging Markets Equity, MFS Emerging Markets Equity Trust, Robeco Emerging Conservative Equity and Russell Emerging Markets, with the MFS fund having the largest exposure at 14.2% and Russell holding 13.5%.
Of these funds, the best-performing fund over one year to 31 July was GQG Partners Emerging Markets Equity which had returned 10% over the period.
Performance of emerging market funds that hold exposure to Korea over one year to 31 July 2020
Franklin Templeton said South Korea had also benefitted from the lower oil price, which fell into negative territory in April, as it was a major net oil importer.
“South Korea embodies much of emerging markets’ new realities; namely institutional resilience, improved economic diversification and the emergence of world-leading emerging market companies,” it said.
“As a major oil importer, South Korea has disproportionately benefited from lower oil prices, while also seeing little economic impact from the collapse in international travel due to its lower dependency on tourism.”
Some of South Korea’s leading companies included Samsung, which was one of the top 10 largest companies of the emerging markets index, LG Electronics, Hyundai Motors and technology firm SK Hynix.
AUTHOR
Laura Dew
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