This Korea ETF Has Soared, But the Rally May Not Be Over

South Korean equities have surged in 2025, driven largely by semiconductor giants SK hynix and Samsung benefiting from strong AI chip demand.

The Matthews Korea Active ETF offers actively managed exposure to Korean stocks, allowing flexibility beyond just semiconductor-focused holdings like technology, industrials, and financials.

MKOR carries a higher 0.79% expense ratio than rival EWY, which has slightly outperformed, but its active approach may better navigate potential volatility.

South Korean equities have had a banner year, highlighted by semiconductor giants like SK hynix Inc. NASDAQ: SKHY, the $1.2-trillion chip giant that has risen more than 10% in the last month alone.

The market's performance may lead some investors to wonder whether the opportunity has already come and gone.

The answer may be nuanced—the rally is volatile, but sustained AI-driven chip demand could continue to fuel growth.

Combine that with changes to corporate governance and the growing emphasis on returning value to shareholders, and it's possible that Korean stocks may have further room to run.

In this case, a prime beneficiary would be an actively managed exchange-traded fund (ETF) ready to be nimble in its efforts to track the Korean market.

The Matthews Korea Active ETF NYSEARCA: MKOR could be just the fund to capitalize on these trends.

Perhaps the strongest argument that Korean stocks may continue to rise through the end of the year is that the market's semiconductor giants are continuing to benefit from a high-demand cycle.

Both SK hynix and Samsung Electronics OTCMKTS: SSNLF are two of the largest and most pivotal suppliers of AI chips and memory products.

Chip exports from South Korean semiconductor makers tripled year over year (YOY) for the month of August, reaching some $47 billion.

Supply constraints are very real and remain a concern—while these are detrimental to companies looking to buy AI hardware, they may continue to benefit the manufacturers who can enjoy elevated pricing and margins.

The extra influx of cash has helped some Korean firms to be able to return shareholder value with increased dividends or share buyback programs.

Of course, a bet on a broader country-focused ETF like MKOR is not just a play on SK hynix and Samsung.

The fund's portfolio is about 46% information technology stocks, leaving significant allocations for industrials, financials, and other sectors as well.

While it leans toward the largest mega-cap companies—with more than 50% of the portfolio dedicated to these names—large-caps and even smaller firms represent sizable portions of the basket as well.

Investors should keep this in mind and look beyond the AI- and tech-focused headlines for Korean equities when considering MKOR.

On an absolute level, MKOR's returns of rougly 80% year to date (YTD) are noteworthy, but a closer look reveals some significant turbulence during that time.

As an actively managed fund, MKOR can pivot quickly to choose companies with sustainable growth signals like strong balance sheets, cash flow, and corporate governance.

The fund's net asset value has increased alongside its returns, but it's worth noting that the MSCI Korea 25/50 Index has actually done better over the same period.