After a difficult 2024, when the exchange-traded fund (ETF) fell 11.6 per cent, IKO has staged an impressive turnaround. Quietly becoming one of this year’s standout comeback stories, the fund’s performance has been buoyed by improved sentiment and policy-driven momentum in the South Korean market.
According to VanEck data, IKO ranked fourth among the top-performing ETFs on the ASX in June, with a monthly return above 15 per cent, and placed eighth across the first half of the year.
The fund seeks to replicate the performance of the MSCI Korea 25/50 Index, which tracks large- and mid-cap South Korean companies. Its top holdings include Samsung Electronics (19.44 per cent) and SK Hynix (11.87 per cent).
Commenting on the rally, AMP chief economist Shane Oliver said recent strength in South Korean equities reflects a broader regional trend, but also a specific catch-up story.
“Most Asian markets have done well this year, but Korea has outperformed because it’s relatively cheap trading on a forward PE of 11.3 times,” Oliver said. “The political uncertainty that erupted last year has now abated, which has enabled the catch-up.”
He added that the country is also benefiting from Bank of Korea rate cuts, with further easing expected.
The Kospi is up 32 per cent year to date, outpacing the MSCI Asia index, which has risen 17 per cent.
Speaking to InvestorDaily, VanEck senior portfolio manager Cameron McCormack said South Korea has quickly become the leading equities destination in Asia.
“Optimism over a new government, which has promised several investor-friendly reforms, has encouraged many global investors to the Korean Stock Exchange, which is up 30 per cent in the first half of 2025,” he said.
In addition to structural reform, South Korea’s long-standing economic momentum continues to underpin investor confidence.
Often referred to as one of the original “Asian Tigers”, South Korea has combined rapid industrialisation with sustained economic growth. According to the World Bank, real gross domestic product grew at an average of 5.7 per cent annually between 1980 and 2023, while poverty rates declined sharply.
“South Korea is a leading global manufacturing hub for several industries, including technology, automotive and defence, and the support of several structural tailwinds could see its equity market continue to rally,” McCormack said.
“Technology companies such as Samsung and SK Hynix are riding the AI revolution, benefiting from an insatiable appetite worldwide for AI-driven semiconductors.
“The growing demand for electric vehicles has been a shot in the arm for car manufacturers Kia and Hyundai, both of which have quickly established a stronghold in the entry-level to mid-range EV space.”
While not widely known for its defence sector, South Korea is a significant player. McCormack noted the country is the second-largest allocation in VanEck’s DFND ETF, after the United States.
“Hanwha Aerospace, a leading aerospace company, has gained 237.18 per cent in the 12 months to 30 June,” he said.
Looking ahead, geopolitical risks remain a key variable, with Oliver warning that trade tensions could cloud the outlook.
“Trump’s tariffs – with a rise from 10 per cent to 25 per cent threatened for 1 August on Korean goods if there is no deal – are a negative and source of uncertainty,” he said. “But they are for other countries in Asia too, and most have been threatened with even higher tariffs than South Korea has.”
