By Andrew Bary

In the battle between the two leading emerging market stock ETFs, iShares has the advantage. South Korea is making all the difference.

The $150 billion iShares Core MSCI Emerging Markets exchange-traded fund (ticker: IEMG) has significantly outperformed its chief rival, the $119 billion Vanguard FTSE Emerging Markets ETF $(VWO)$ in 2026 and over the past 12 months. That's because the iShares ETF has exposure to the hot Korean market, while the Vanguard fund doesn't.

The iShares ETF, now trading around $78, has jumped 38% over the past year and 18% so far in 2026, while the Vanguard ETF, at about $58, has gained 22% in the past 12 months and 9% so far in 2026.

South Korea, one of the hottest stock markets in the world, accounts for the bulk of the disparity. The country's semiconductor-led market has skyrocketed about 75% this year and nearly tripled over the past 12 months. The Korean market now accounts for about 20% of the iShares ETF, double its weighting of a year ago.

Two top memory chip makers, Samsung and SK Hynix, are leading the Korean market. Their shares are up fivefold and eightfold during the past year, respectively, with Samsung crossing the $1 trillion market value threshold recently. Samsung ranks second among all non-U.S. companies in market capitalization, behind No. 1 Taiwan Semiconductor Manufacturing, while SK Hynix is fourth.

The iShares ETF tracks the MSCI emerging-markets index, which includes Korea, while the Vanguard ETF follows a FTSE index that doesn't.

However, it's debatable whether South Korea should be classified by MSCI as an emerging market given the size and technology-orientation of its first-world economy. It's the same for Taiwan, which is in both the MSCI and FTSE emerging market indexes.

"Korea meets the core characteristics investors typically associate with developed markets -- including economic maturity, scale, and liquidity -- and several major index providers already classify it that way," says Carole Okigbo, global head of ETF capital markets and broker and index relations at Vanguard.

In choosing between the two ETFs, it comes down to investor views on memory chips. If an investor is concerned about a chip bubble, the Vanguard fund likely is the better choice, and if an investor is comfortable with the tech-heavy Korean market, then the iShares ETF is probably a superior option. The Vanguard fund offers a higher weighting in Taiwan, a market dominated by Taiwan Semiconductor.

The iShares ETF's top country weightings are Taiwan at 25% and Korea and China at about 20% each. The Vanguard ETF's top weightings are Taiwan and China, both at around 29% each.

The Vanguard fund has a slightly lower expense ratio at 0.06% a year against 0.09% for the iShares fund.

Among non-U.S. developed market ETFs, Vanguard funds like Vanguard FTSE Developed Markets $(VEA)$ and Vanguard FTSE All-World ex-US $(VEU)$ contain Korean stocks, while iShares funds like iShares Core MSCI International Developed Markets ETF (IDEV) and iShares Core MSCI International Developed Markets ETF $(IEFA)$ do not.

Thanks to their Korea exposure at about 5%, those Vanguard ETFs are topping their iShares counterparts over the past year by five to seven percentage points.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 19, 2026 14:35 ET (18:35 GMT)

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