Under The Hood: South Korea, Small-Cap Style

Just two days removed from highlighting the iShares MSCI South Korea Index Fund EWY as a legitimate trading idea for those investors looking to play a relatively safe emerging market, we thought the timing was right to stick with the South Korea theme. Hey, if it's good enough for Warren Buffett, why not have a look? This time, we'll take a look at this burgeoning market from the small-cap side as we go under the hood with the IQ South Korea Small Cap ETF SKOR. SKOR, which is just a few weeks shy of its one-year anniversary, is part of IndexIQ's suite of country-specific small-cap ETFs, a quartet that also includes Australia, Canada and Taiwan. As is the case with many new ETFs, SKOR isn't going to win any daily volume contests at just over 12,000 shares a day. This should not be a case against the ETF though. SKOR can pack quite a punch if timed correctly (the ETF is up almost 8.6% just in the past week) and has basically been a solid performer from the long side since inception. SKOR has 101 holdings and is pretty diverse at the sector level. Industrials get a weight of 32.4%, by far SKOR's largest, but materials, technology, consumer discretionary and financials all get weights of about 13% to 16%. All of SKOR's components are listed on the Korea Stock Exchange. As of right now, options don't trade on the ETF and the expense ratio of 0.79% is high. From the traders perspective, SKOR can probably be bought here with a stop below $28 because that would be a big breakdown. Add to the position on a breakout above $32. Long-term holders can ride South Korea's steady growth story and use SKOR as a way to get some less risky emerging markets small-cap exposure.