Despite hosting several innovative companies, South Korean shares have lagged global and emerging market indices over the long term.

Some of this relates to the recent struggles of Samsung Electronics (005930:KRX) which still has a near-25% weighting in the MSCI Korea index. This helps obscure the fact there are some strong performers in the index, with a clear dividing line between winners and losers. Samsung’s dominance also explains why information technology is such a dominant sector, accounting for more than 40% of the index.

Industrials, consumer discretionary stocks and financials also have a meaningful presence, reflecting the country’s strong automotive and aerospace industries.

What is striking is the underperformance of MSCI Korea versus the broader emerging markets and MSCI ACWI (All Countries World Index) global indices over the long term.

From 31 May 1994 through to 31 March 2025, MSCI Korea has delivered an annualised return of just 4.7% versus 5.3% for emerging markets and 7.9% for MSCI ACWI.

On a 10-year view it compares even more poorly with an annualised return of just 2.2% versus 4.1% for MSCI Emerging Markets and 9.1% for MSCI ACWI.

This has left the index’s average forward price to earnings ratio at a significant discount to both its global and broad emerging markets counterparts – at 8.3 times versus 12 times for MSCI Emerging Markets and 17 times for MSCI ACWI.  

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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