Core Viewpoint - A weakening U.S. dollar, global de-dollarization, and lower interest rates are creating favorable conditions for emerging market (EM) ETFs, with South Korea emerging as a compelling investment opportunity [1]. Group 1: Performance of South Korean ETFs - Country ETFs focused on South Korea have significantly outperformed the broader MSCI Emerging Markets Index this year [2]. - Notable outperforming ETFs include iShares MSCI South Korea Index (EWY), Franklin FTSE South Korea ETF (FLKR), Direxion Daily South Korea Bull 3X Shares (KORU), and Matthews Korea Active ETF (MKOR) [2]. - EWY has over $6 billion in assets under management, benefiting from BlackRock's brand recognition [3]. - KORU, with its 3x leverage, has seen over 300% growth, but is recommended for seasoned traders as a tactical tool [3]. - MKOR is actively managed, capitalizing on the nuances of South Korean equities, which provides an advantage over passive funds [4]. Group 2: Economic Drivers - South Korea's economy is recovering after a pandemic-induced downturn, with signs of vitality noted by the Finance Minister [5]. - The Korea Composite Stock Price Index (KOSPI) is reaching record highs, supported by government stimulus measures aimed at boosting consumer spending [5]. - Optimism is growing as the Bank of Korea has raised its growth targets, with major financial institutions like Goldman Sachs and JP Morgan following suit [5]. Group 3: Future Prospects and Innovations - The focus on artificial intelligence (AI) and technological innovation is expected to drive growth, supported by a five-year economic plan from the South Korean government [7]. - The government is committed to enhancing innovation in AI, robotics, machine learning, and other technological sectors [7]. Group 4: Diversification Strategies - Investors may seek to hedge risks associated with concentrated exposure to South Korea by considering ETFs that include South Korean equities as part of a broader emerging markets strategy [8]. - Suggested funds for diversified exposure include First Trust Asia Pacific ex-Japan AlphaDEX Fund (FPA), VanEck Vietnam ETF (VNM), VictoryShares Emerging Markets Value Momentum ETF (UEVM), and KraneShares MSCI Emerging Markets ex China Index ETF (KEMX) [9].

Core Insights - Vietnam has been upgraded from frontier to emerging market status by FTSE, effective September 2026, following years of maturation in its market [1][2] Group 1: Impact of Vietnam's Upgrade - The upgrade will benefit existing Vietnam ETFs through price appreciation and potential net inflows [2] - Emerging market indexes and ETFs may include Vietnam, enhancing exposure to the country starting in 2026 [2] - Vietnam's economy may experience increased sentiment and exposure, particularly benefiting IPO activities in the equity market [2] Group 2: Understanding Frontier Markets - Frontier markets are classified by FTSE as less developed than emerging markets, with around 30 countries currently in this category [3] - These markets meet minimum investability and accessibility standards but lack the liquidity and pricing transparency of emerging markets [3] Group 3: ETF Landscape - U.S.-listed frontier ETFs have ceased to exist due to liquidity issues, with recent closures of Invesco's and BlackRock's frontier market ETFs [5] - Changes to FTSE indexes will allow Vietnam exposure in ETFs like the Vanguard FTSE Emerging Markets ETF (VWO) and Schwab Emerging Markets Equity ETF (SCHE) starting in September 2026 [6] Group 4: Performance of Vietnam ETFs - Following the upgrade announcement, Vietnam ETFs have seen price increases, with VNM up approximately 8% and VNAM up around 7% [8] - Year-to-date, Vietnam ETFs have risen about 70%, indicating strong market performance [9] Group 5: Investment Strategies - Investors may consider single-country ETFs like VNM and VNAM for targeted exposure to Vietnam, as allocations in broader emerging market ETFs are expected to be low [10] - The VanEck Vietnam ETF (VNM) has $609 million in assets, primarily focused on real estate and financials, while the Global X MSCI Vietnam ETF (VNAM) has around $25 million in assets with a similar sector focus [11]