Posted on November 11, 2013 by Charles Sizemore in ETFs

This month, WidomTree launched a new South-Korea focused ETF, the WisdomTree Korea Hedged Equity Fund ( DXKW ). This goes head-to-head against a well-entrenched competitor, the iShares MSCI South Korea ETF ( EWY ). which trades about 2.5 million shares per day and has assets of about $4.4 billion.

It also brings up two questions: For one, does WisdomTrees new offering stack up against the competition? But more broadly, should you invest in South Korea stocks at all?

Buying South Korea

As I wrote last month, South Korea is a little hard to define. Although it tends to get a high weighting in emerging-market funds and ETFs, its not an emerging market. Its GDP per capita, at around $32,000 by IMF estimates. is slightly above the European Union average and is higher than Spain and Italy. As a point of reference, its also more than double the level of rising emerging markets such as Mexico and Turkey and nearly triple that of Brazil.

With living standards comparable to Western Europe, South Korea should be considered a developed market, and fund managers are belatedly starting to accept this. The EG Shares Beyond BRICs ETF   ( BBRC ) a new entrant in the emerging-market space, specifically excludes South Korea as well as Taiwan and the four BRIC economies of Brazil, Russia, India and China.

South Korea stocks include several world-class multinationals among them Samsung ( SSNLF ). Posco ( PKX ). and Hyundai Motor Company ( HYMTF ) and its students rank higher than most of their developed-world peers.

Demographically, South Korea will eventually hit a brick wall. Its fertility rate. at 1.24 children per mother, is even lower than that of China and Japan but that is a long-term problem that wont be an issue for another couple decades.

So, yes, you should buy South Korea stocks at least at the right price. And hey, by Financial Times estimates. the country is reasonably priced at about 15 times trailing earnings.

With all of that as an introduction

Which ETF Is Best for South Korea Stocks?

Based on fees and trading expenses, its close to a wash. EWP and DXKW have expense ratios of 0.61% and 0.58%, respectively. EWP has a much larger trading volume 2.5 million shares per day vs. 4,900 but DXKW is still a new fund, and its trading volume might be comparable given time.

Looking at the top holdings of each, we see some familiar names: