South Korea: A Bright Spot in Emerging Markets


To Hedge or Not to Hedge While we see opportunity in South Korea, it’s important to note that the key drivers of performance were the equity returns alone. Layering on currency risk (inherent to all unhedged international investing) dragged down the total performance. The chart below makes this point. South Korea’s Equity Market vs. MSCI Emerging Markets vs. the Currency• South Korea is a major exporter. Compared to performance we’ve seen from exporters in Japan and Europe in the recent past,1 we see similar potential in South Korea. • The South Korean won is relatively inexpensive to hedge—meaning that short-term interest rates tend to be lower than those in more commodity-focused emerging market countries such as Brazil. • It is widely known that South Korean companies and Japanese companies are close competitors. Since November 30, 2012, two weeks prior to the election of Japanese prime minister Shinzo Abe, the South Korean won has appreciated approximately 24% versus the Japanese yen. From December 31, 2015, to March 16, 2016, the South Korean won depreciated 8% against the Japanese yen.2 Could this be a catalyst for the equities in this market to regain some of their global competitiveness?
Important Risks Related to this Article
Investments focused in South Korea increase the impact of events and developments associated with the region, which can adversely affect performance.

Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFA®, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he was based out of WisdomTree’s London office and was responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. In November 2021, Christopher was promoted to Global Head of Research, now responsible for numerous communications on investment strategy globally, particularly in the thematic equity space. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst Designation.