Korea ETFs

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Average returns in this Category	3 months return	6 months return	12 months return	YTD return

Korea	2.54%	26.57%	-7.40%	13.78%

Ticker SPY	Name	3 months return	6 months return	12 months return	YTD return

DBX1K2	MSCI KOREA TRN ETF	2.54%	26.57%	-7.4%	13.78%


	About Korea ETFs
Korea Emerging markets ETFs Overview and forecast There's only one ETF in our Korea ETFs, but it's an important one, and it's a good look at a particular ETF model. MSCI KOREA TRN ETF (FRANKFURT: DBXIK2) is a classic case of a very high unit value ETF in an exotic market where investment capital is strong. This ETF started trading in 2007 at about $2600, went up to $3000 almost instantly, and then began a Rate Of Change (ROC) saga of its own. This model of ETF is controversial. The high value units are strange traders, and if they can definitely produce good returns on prices, their margins are definitely an acquired taste. DBXIK2 has been proving a few points about how these funds operate. Most of them are based on MSCI indices, and ishares is known to use them in some of its local markets. If you check back on our charts, DBX1K2 produces an ROC which is very informative, particularly when you equate the ROC with volumes. The volumes aren't high, but the average price for these units is around $2000 each. So the purchases are big enough, and if the trading is a little slow by comparison with the normal ETF price bandwidths, the market is definitely being supportive. High unit value ETFs have a tendency to flatline for periods which most traders would find irritating, but when they move, they're worth watching. It's interesting to see where the spikes are, and some of the unit price margins definitely aren't dull reading. Short term (6 months) The broad view is that these ETFs are great in booms, alarming in busts, and if you know your Bollinger Bands, they're very handy things to have in the portfolio. DBX1K2 is a trader which gives an excellent perspective on how these ETFs work. When unit price margins give a profit of $400 a unit in a month, this is behavior pattern is well worth learning. The short term view for DBX1K2 is that because its upside is hovering around the $2000 mark in mid 2009, some upside, up to $2200- 2400, is a credible possibility, perhaps more. There doesn't seem to be much stopping DBX1K2 from consolidating this bandwidth and adding value, now that the recession has had its say and the big hit on Korean exports has apparently peaked. Mid term (2 years) ROC in the high value ETFs is always unusual, and there's no such thing as a single thread or trend over a 2 year period. Unlike other ETFs, the high unit price does have a few effects on trading, and when buying millions of dollars worth of units, some discounts are quite normal. As you will have noticed from our chart, DBX1K2 occasionally runs a bumpy ride under the median line, and that is perfectly normal behavior for these ETFs. The positive perspective, however, is the investment market itself. DBX1K2 has established itself firmly in the lower middle of its price bands, and the potential for upside in a reviving capital investment market is good. Pro investors could find good reasons for buying a wide spread in an energetic capital market like Korean equity, and this ETF is a good way of doing that. The Korean equity market is currently looking like it's well below its own averages, so mid term upside is a definite consideration. Long term (5 years) It would be absurd to assume that any high unit price ETF doesn't evolve and develop over a period like 5 years. All of these ETFs do make big moves over time, and in 5 years, several can be expected. The positive outlook remains, but it has to be recognized that these ETFs have their own behavioral rules, one of which is that prices can move quite suddenly. That really hits price margins, sometimes hard, and the flatlining habit can pin holdings below purchase prices for quite a while. The long term view is good, overall. The Korean economy is one of Asia's star performers, and the quality of the equity holdings for DBX1K2 aren't in question. It's a good model for an ETF in a high capital market. Returns have been reasonable, even under tough conditions, which indicates some stamina in DBX1K2 as an investment. Qualifiers to projections The high unit price ETFs are definitely not day trader materials, and long term investors could get seasick watching their ROCs. This is investor territory, and the whole idea of buying spreads is the better approach. DBX1K2 holds Korean stocks available on global stock markets, and a look at the way the Korean index operates is strongly advised prior to any commitment. This is a highly intense, big capital, market, and it can be a shock to those used to less ferocious markets. It wouldn't be surprising, given the values of trade, if these ETFs become more popular in local market investment spreads among pro investors and major funds. Their major issue as traders is that they don't seem to have yet penetrated this natural market. They're a better option in terms of doing large purchases and sales, and they have definite advantages in their compartmental approach to international holdings. They're not messy, bitsy, portfolios of holdings, but good index based purchases, with some depth.

Last Updated on: 2010-01-14 02:03:40

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