Franklin FTSE South Korea ETF (FLKR)

Franklin FTSE South Korea ETF (FLKR) Summary:

Profile:

The Franklin FTSE South Korea ETF (FLKR) is an exchange-traded fund that seeks to provide investment results that, before expenses, generally correspond to the total return performance of the FTSE South Korea Capped Index. This index is designed to capture the performance of large and mid-capitalization companies listed on the Korea Exchange (KRX). FLKR invests in a broad basket of South Korean stocks across various industries, aiming to track the overall South Korean equity market.

Investment Objective:

FLKR's primary objective is to provide long-term capital appreciation by replicating the performance of the FTSE South Korea Capped Index. This means the ETF seeks to offer investors exposure to the South Korean stock market's overall growth potential.

Issuer:

Franklin Templeton Investments:

• Reputation and Reliability: Founded in 1947, Franklin Templeton Investments is a global investment management organization with over $1.4 trillion in assets under management. It has a long-standing reputation as a reputable and reliable asset manager, recognized for its strong investment performance and commitment to client service.
• Management: Franklin Templeton employs experienced portfolio managers and analysts with expertise in various asset classes and markets, including emerging markets like South Korea.

Market Share:

As of November 2023, FLKR holds approximately 0.4% of the total assets invested in South Korea Equity ETFs listed in the U.S.

Total Net Assets:

As of November 2023, FLKR has approximately $210 million in total net assets.

Moat:

• Experienced Management: FLKR benefits from Franklin Templeton's extensive experience and expertise in managing international and emerging market equities.
• Global Brand Recognition: Franklin Templeton's established global presence provides FLKR with access to diverse investor networks and potential capital inflows.
• Cost Efficiency: FLKR has a relatively low expense ratio compared to other South Korea equity ETFs, making it an attractive option for cost-conscious investors.

Financial Performance:

• Historical Performance: Since its inception in 2009, FLKR has generally delivered returns aligned with the FTSE South Korea Capped Index. The ETF experienced significant growth in 2017 and 2021, mirroring the broader Korean market's positive performance during those periods.
• Benchmark Comparison: FLKR has closely tracked its benchmark index over time, demonstrating its effectiveness in replicating the index performance.

Growth Trajectory:

The South Korean economy, known for its technological advancements and export-oriented industries, has experienced steady growth in recent years. Factors like government investments in innovation and a young, tech-savvy workforce contribute to this positive outlook. However, ongoing geopolitical complexities and global economic uncertainty could pose challenges.

Liquidity:

• Average Trading Volume: FLKR exhibits moderate trading activity with an average daily volume exceeding 50,000 shares, making it a reasonably liquid ETF.
• Bid-Ask Spread: The bid-ask spread for FLKR typically falls within a tight range, indicating relatively low transaction costs associated with buying or selling shares.

Market Dynamics:

• Economic Indicators: South Korea's economic growth is influenced by domestic factors such as consumer spending, government policies, and technological innovation. Additionally, global economic conditions, particularly trade relations with major partners like China and the United States, significantly impact South Korean markets.
• Sector Growth Prospects: Key industries driving South Korea's growth include semiconductors, electronics manufacturing, and information technology. Continued advancements and innovation within these sectors will play a crucial role in shaping the market's future performance.

Competitors:

• iShares MSCI South Korea ETF (EWY): Market share - 70.8%
• VanEck Korea Small-Cap ETF (EKR): Market share - 4.5%
• KraneShares Bosera MSCI South Korea Small-Cap ETF (KSC): Market share - 5.2%

Expense Ratio:

FLKR's expense ratio is 0.40%, making it a relatively cost-efficient option compared to some competitors with expense ratios ranging between 0.45% to 0.65%.

Investment Approach and Strategy:

• Strategy: FLKR tracks the FTSE South Korea Capped Index, aiming to replicate its performance before accounting for the ETF's expenses.
• Composition: The ETF primarily holds large and mid-sized companies listed on the Korea Exchange. Its portfolio is widely diversified across various industries, with significant allocations towards technology, financials, and consumer discretionary sectors as of November 2023.

Key Points:

• Provides broad exposure to the South Korean stock market through a single investment vehicle.
• Seeks to replicate the performance of the FTSE South Korea Capped Index, offering a benchmark-driven investment approach.
• Managed by a reputable asset manager with extensive global expertise and experience.
• Relatively cost-efficient compared to several competitors within its category.

Risks:

• Market Volatility: As a South Korea-focused equity ETF, FLKR is inherently exposed to market volatility associated with the Korean stock market and broader economic conditions.
• Emerging Market Risk: Investments in emerging markets like South Korea generally involve higher risks compared to developed markets due to factors like political instability, currency fluctuations, and less-regulated markets.
• Sector Concentration Risk: FLKR's holdings are concentrated in specific industries like technology, making the ETF sensitive to performance fluctuations within those sectors.
• Currency Risk: FLKR is exposed to currency exchange rate fluctuations as its underlying assets are denominated in South Korean Won.

Who Should Consider Investing:

FLKR could be suitable for investors who:

• Seek long-term capital growth potential through exposure to the South Korean equity market.
• Have an investment horizon aligned with the ETF's strategic objectives.
• Possess a tolerance for higher risk associated with emerging market investments and sector concentration.
• Value cost-efficient investment solutions with moderate liquidity.