Overlook FXI. The South Korea Fund Beating China’s AI Commerce Costs 19% Much less

Fast Learn

EWY outpaces FXI by practically 190 proportion factors over the previous yr whereas charging 14 foundation factors much less in annual charges.
Samsung and SK Hynix give EWY direct publicity to AI reminiscence {hardware}, however that very same focus drove a 12% single-day drop on June 23.
FXI buyers holding taxable losses can harvest them towards positive factors whereas rotating proceeds into EWY, or break up positions to maintain China coverage publicity.
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The iShares China Giant-Cap ETF (NYSEARCA:FXI) is the default method most U.S. buyers play China’s AI commerce. FXI holds the nation’s largest tech names, Alibaba, Tencent, Baidu, Meituan, and JD, which is precisely what buyers need once they wager that China’s hyperscalers will mirror the U.S. AI capex cycle. The case for proudly owning FXI has at all times rested on low-cost valuations and the idea that Beijing’s coverage help will finally pull these massive caps greater. That logic nonetheless has advantage, however a neighboring fund is doing the job higher at decrease price, and the hole has widened sharply over the past 12 months.

South korea national flag against low angle view of skyscrapers at sunset — wavebreakmedia / Shutterstock.com

What FXI Is Really Delivering

This fund expenses a 0.74% expense ratio as of its April 23, 2026, prospectus, which is among the many greater charges you will see for single-country emerging-market publicity. The returns have probably not justified that price both. The fund is down 13.62% year-to-date and 5.87% over the previous yr, closing at $32.83 on June 23, 2026. If you happen to stretch the window out even additional, the image will get worse, as a result of it has misplaced 17.81% over the previous 5 years.

The structural downside is publicity high quality. FXI’s holdings are platform corporations and client web names that purchase AI chips. They’re downstream customers of the AI build-out and sit inside a regulatory regime that may rewrite their economics in a single day. That could be a actual constraint when international capital is paying up particularly for {hardware} publicity to AI infrastructure.

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EWY Owns the Picks and Shovels

The iShares MSCI South Korea ETF (NYSEARCA:EWY) holds Samsung Electronics and SK Hynix as its two largest positions. SK Hynix provides the high-bandwidth reminiscence stacked subsequent to each modern AI accelerator, and Samsung is the second supply. That makes EWY one of many cleanest listed proxies for the {hardware} layer of the AI commerce, relatively than the appliance layer that FXI is uncovered to.

The price math is easy. EWY expenses a 0.59% expense ratio as of its Might 4, 2026, prospectus. That’s roughly 19% lower than FXI’s 0.73%, or 14 foundation factors a yr on each greenback invested. On a $50,000 place, that’s $70 a yr retained contained in the fund relatively than paid out in charges, compounding for so long as the place is held.

Efficiency has actually adopted the publicity right here. This fund is up 97.7% year-to-date by June 23, 2026, and 183.17% over the previous 12 months. The five-year return is 128.54%, whereas the 10-year return is 364.79%. The latest surge displays the HBM pricing cycle relatively than a one-off catalyst, and it tracks the identical reminiscence upcycle now evident within the Goldman Sachs and PineBridge 2026 outlooks, which level to a rebound in wafer-fabrication tools spending.

The Tradeoffs Price Naming

The swap carries actual tradeoffs that buyers ought to weigh earlier than treating EWY as a like-for-like FXI alternative. The swap strikes nation threat from China to South Korea, foreign money publicity from the yuan to the received, and sector combine from web platforms to reminiscence semiconductors. EWY can also be extra concentrated on the high: Samsung and SK Hynix collectively drive many of the fund’s day by day strikes, so a flip within the reminiscence cycle hits tougher than it might on a broad index. EWY fell 12.25% on June 23 alone, a reminder that the identical focus that drove the rally additionally amplifies drawdowns.

And the run has been massive. After an 187% one-year complete return, anybody rotating in at present is shopping for after the transfer, not earlier than.

Assume In regards to the Swap

In a tax-advantaged account, promoting FXI to fund an EWY place is mechanically easy, and the price financial savings begin instantly. In a taxable account, anybody sitting on FXI losses can harvest them towards positive factors elsewhere whereas rotating the proceeds. Buyers who need to preserve some China beta can break up the place, holding partial FXI publicity for any policy-driven rebound whereas routing the remainder to EWY for {hardware} AI publicity. The choice activates which AI commerce an investor really desires to personal: the platforms that purchase the chips, or the corporate that builds the reminiscence inside them.

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