While index providers FTSE and MSCI are split on whether South Korea constitutes an emerging market or not – FTSE says no and MSCI yes – just how does this market compare with its peers in the developing world?

Despite some considering South Korea to be a developed market, the annualised gross returns for the MSCI Korea index over the last 30 years and over the last decade are actually remarkably similar to the wider MSCI Emerging Markets index as the chart shows.

There is a significant difference in the nature of the two indices though. MSCI Korea is made up of 98 constituents with an average market value of nearly $9.4 billion compared with an average valuation of $5.7 billion for the MSCI Emerging Markets’ 1,330 constituents.

MSCI Korea has an historic dividend yield of 1.9% and trades on a forward price to earnings ratio of 9.9 times compared with 2.6% and 12.3 times respectively for MSCI Emerging Markets.

The South Korean index also has a much more significant weighting towards technology and industrials compared with its broader emerging markets counterpart and a much lower weighting towards financials.

Unsurprisingly MSCI Korea is less diversified with Samsung Electronics (005930:KRX) enjoying a weighting of 30.5%. The most dominant name in the MSCI Emerging Markets index is Taiwan Semiconductor (2330:TPE), which has a weighting of 9.7%.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

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