Should You Bet on South Korea ETFs After the Kospi Rally?

Kospi, South Korea’s benchmark index, hit an all-time high above 5,600 on Thursday, after gaining about 3.09% in a single trading session. South Korea remains one of Asia’s most lucrative markets, with the Kospi surging 79.35% over the past six months and 115.54% over the past year.

According to Goldman Sachs, as quoted on CNBC, South Korea stands out as Asia-Pacific’s top market, having almost doubled in 2025. The investment bank’s analysts argue the momentum is far from over, projecting Korean equities to surge 120% in 2026.

This forecast may not be overly optimistic. With the Kospi already up about 34.39% so far this year, South Korea could be on track for another standout year. According to the Korea Times, the Kospi rally was driven by strong gains in semiconductor and other heavyweight tech shares, as enthusiasm surrounding AI strengthened, helping sustain the economy’s upward momentum.

Fresh Capital Fuels the Upswing

Per another article from the Korea Times, in 2025, foreign investors increased their exposure to Korean stocks to 1,327 trillion won or $916 billion, almost double the 673 trillion won recorded in 2024, reflecting confidence in the country’s robust economic momentum. Much of the rally was driven by AI-related sectors, particularly semiconductors and electronics.

Foreign investors’ share of overall market capitalization climbed to 30.8% in 2025 from 27% in 2024, with U.S. investors leading the inflows. According to financial market data, as quoted on the abovementioned article, U.S. investors held 546 trillion won in Korean equities.

Per an industry official, as quoted on the abovementioned article, these developments help Korea stand out among emerging markets, drawing strong interest from institutional and retail investors alike, driving fresh inflows and sustaining the rally.

Beyond South Korea’s strong growth narrative and compelling investment opportunities, a declining U.S. dollar is providing an added tailwind for capital inflows into South Korea. According to TradingView, the U.S. Dollar Index has fallen 1.41% over the past month and 8.68% over the past year.

A Brighter Growth Trajectory

In a further sign of momentum, the Korea Development Institute upgraded its 2026 growth forecast to 1.9%, pointing to solid semiconductor exports supported by global AI-driven demand, according to UPI. After expanding roughly 1% last year, South Korea’s economy is projected to see growth nearly double this year, largely driven by stronger semiconductor demand linked to AI spending, per the institute.

Per an article from the Korea Times, growth estimates remain broadly aligned, with the IMF forecasting 1.9% real GDP growth, the Bank of Korea 1.8%, and the OECD 2.1%. Moody’s forecasts 1.8% growth for Korea in 2026, underpinned by expanding semiconductor exports and stronger investment as the global AI upcycle persists. Additionally, Moody’s Investors Service retained South Korea’s “Aa2” credit rating with a stable outlook, as per the article.

On the export front, exports in January rose 33.9% from a year earlier to $65.85 billion, with semiconductor exports soaring 102.7% to $20.54 billion, staying above $20 billion for the second straight month, per the Ministry of Trade, Industry and Energy, as quoted on the abovementioned UPI article.

Accessing South Korea Through ETFs

South Korea ETFs continue to shine, positioning the country among the most attractive investment destinations in Asia. However, persistent tensions between Washington and Beijing are placing strategic pressure on the South Korean economy, complicating Seoul’s effort to balance its defense alignment with Washington and economic reliance on Beijing, per a UPI article.

Below, we have highlighted a few funds that offer exposure to South Korea’s markets.

Franklin FTSE South Korea ETF FLKR

Franklin FTSE South Korea ETF has double-digit exposure to information technology (47.27%), industrials (19.11%) and financials (11.98%). Its top two holdings, Samsung Electronics and SK Hynix, dominate the portfolio with weightings of 21.55% and 20.02%, respectively.

Franklin FTSE South Korea ETF charges an annual fee of 0.09% and has a dividend yield of 2.87%. The fund has gained 26.64% over the past month and 127.32% over the past year.

iShares MSCI South Korea ETF EWY

iShares MSCI South Korea ETF has double-digit exposure to information technology (50.09%), industrials (18.23%) and financials (11.29%). Its top two holdings, Samsung Electronics and SK Hynix, dominate the portfolio with weightings of 28.36% and 18.95%, respectively.

iShares MSCI South Korea ETF charges an annual fee of 0.59% and has a dividend yield of 1.53%. The fund has gained 26.30% over the past month and 133.36% over the past year.

More Diversified Exposure

For investors seeking diversified, less concentrated exposure to the Asian economy, the following funds may be worth considering.

First Trust Asia Pacific ex-Japan AlphaDEX Fund FPA has an exposure of 53.58% to South Korea.

iShares Asia 50 ETF AIA has an exposure of 25.94% to South Korea.

KraneShares MSCI Emerging Markets ex China Index ETF KEMX has an exposure of 24.71% to South Korea.

Freedom 100 Emerging Markets ETF FRDM has an exposure of 18.05% to South Korea.

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