Korea's 3.9% drop split two kinds of emerging-markets fund
For the week ended Friday, September 18, iShares' MSCI South Korea ETF fell 3.9% after the Federal Reserve raised rates to 3.75%-4.00%, splitting MSCI emerging-markets funds that own Korea from FTSE funds that do not.
On Monday, September 14, iShares' MSCI South Korea ETF EWY fell 6.6%. The Kospi closed down 3.3% at 6,684.37 as foreign investors sold and oil stayed high, with U.S. debate over the pace of AI development hanging over the chip stocks that dominate the fund. By Friday's close, EWY was still down 3.9%.
What split two broad emerging-markets funds with nearly identical names was whether that loss sat inside the portfolio. MSCI still counts South Korea as emerging. FTSE treats it as developed. iShares' Core MSCI Emerging Markets ETF IEMG follows MSCI, so it held the Korea names through the drop. Vanguard's FTSE Emerging Markets ETF VWO follows FTSE, so it did not. IEMG fell 1.1%. VWO fell 0.4%.
Korea's drop passed through IEMG, not VWO
- EWY · 181.31
- IEMG · 81.66
- VWO · 60.01
Korea inside MSCI funds, outside FTSE funds
The 2026 EM gap is still a Korea classification. This week that line cut the other way.
A reader choosing IEMG is choosing MSCI's Korea-in rule. Samsung Electronics, SK Hynix, and Samsung preferred are how a 3.9% Korea week shows up in that return. A reader choosing VWO is choosing FTSE's Korea-out rule, so this week's gap ran through those three names rather than through China.
Dropping China does not settle the question. iShares' MSCI emerging-markets ex-China ETF EMXC still uses MSCI's Korea-in list, which leaves the Korean chip names larger once China is gone. It fell 1.3%. Vanguard's Emerging Markets Ex-China ETF VEXC tracks the FTSE Emerging ex China Index, so it excludes both China and Korea. It fell 0.5% in total return, after going ex-dividend $0.5427 on Friday. Same "ex-China" label, different Korea decision, different week.
EWY is the undiluted MSCI choice: a single-country fund whose largest bets are those same chipmakers, with technology more than half the portfolio.
SK Hynix and Samsung dwarf the rest of EWY
- 25%
- 22%
- 2.8%
- 2.5%
- 2.0%
- 1.7%
- 1.6%
- 1.4%
A 3.9% week is what that concentration looks like when the AI trade has a bad Monday. Taiwan was not the problem. TSMC is the largest holding in both IEMG and VWO, and iShares' MSCI Taiwan ETF EWT rose 0.7%.
iShares' MSCI India ETF INDA fell 1.1%, extending a month that is now down 3.1%. Brent crude settled at $103.87 a barrel on Friday, off 0.7% from the prior Friday but still 11% above a month earlier after a midweek spike to $108.75. India imports that barrel. INDA is down 11.2% year to date, in the same hole as iShares' MSCI China ETF MCHI at -11.1%. This week, only one of those two kept falling.
The MSCI wrappers that own Korea lagged the FTSE wrappers that do not.
Week is total return, Friday, September 11 close through Friday, September 18. Year to date runs from December 31, 2025. Korea chips is Samsung Electronics plus SK Hynix; in IEMG and EMXC the figure also includes Samsung preferred. 0% means the index does not include Korea.
Fed hike to 3.75%-4.00%
The Federal Open Market Committee voted 12-0 on Wednesday, September 16, to raise the federal-funds target range by a quarter point to 3.75% to 4.00%. The Fed said the move was in support of its dual mandate. It had held the range at 3.50% to 3.75% in July. The 10-year Treasury yield finished Friday at 5.01%. The dollar index rose 1.1% on the week, to 100.22, measured from the Friday, September 11 close through Friday, September 18.
That is the mechanic inside an unhedged local-currency fund. VanEck's J.P. Morgan EM local-currency government bond ETF EMLC fell 1.0%. iShares' dollar-denominated EM bond ETF EMB was flat, up 0.04%. Same asset class, different currency: the week's loss sat in the FX, not in the credit.
Brazil's central bank cut the Selic to 13.75% the same week the Fed hiked. iShares' MSCI Brazil ETF EWZ still fell 1.8%. Easing in Brasília did not offset a firmer dollar.
China's 5.2% industrial output and 0.4% retail sales
August industrial output in China grew 5.2% from a year earlier, up from 4.5% in July. Retail sales grew 0.4%, slower than July's 0.6%. That split is the one that matters for anyone still waiting for a consumption floor under Chinese equities.
The China bounce, such as it was, arrived on Friday. KraneShares' CSI China Internet ETF KWEB, which owns offshore-listed internet names, rose 1.8% on the session and 0.9% for the week. Invesco's China Technology ETF CQQQ rose 1.6% for the week. Xtrackers' CSI 300 A-shares ETF ASHR rose 0.4%. iShares' China Large-Cap ETF FXI, the Hong Kong-listed mega-cap book, fell 0.5%. MCHI rose 0.2%. T. Rowe Price attributed Friday's rebound to a semiconductor and technology rally as the yuan strengthened.
President Donald Trump is scheduled to host Xi Jinping in Washington on Thursday, September 24, with trade, tariffs, technology restrictions, and critical minerals on the table. It is the next policy print for every China share-class. It is not evidence that Chinese households are spending again.
One week is not the year
Korea funds were up 94% year to date a week ago, against a 28% loss in China internet. EWY is still up 86.5% in 2026 after this week's drop. KWEB is still down 27.1%. EMXC is still up 37.4%, a 48-percentage-point gap over MCHI. The year's ranking did not change. The week's ranking did.
A-shares remain the China listing that is not in the hole: ASHR is up 2.8% year to date. The offshore internet book is the one that is.
Thursday's meeting in Washington is the next date that can move ADRs, semiconductors, and the Hong Kong large-caps. It will not rewrite August retail sales. The dollar, a $104 barrel, and a 12.2% Korea-chip weight in IEMG already did this week's work.
Frequently asked
Why did two broad emerging-markets funds move differently in the same week?
MSCI classifies South Korea as emerging and FTSE classifies it as developed, so the Korean chip selloff sat inside the MSCI fund and not the FTSE one.
Did dropping China remove the difference?
No: the MSCI ex-China fund still holds Korea, and with China gone the Korean chipmakers loom larger, while the FTSE ex-China fund excludes both.
Was this a broader Asia tech selloff?
No, Taiwan was not the problem: TSMC is the top holding in both broad EM funds and the iShares Taiwan fund rose on the week.
Why did the EM local-currency bond fund fall while the dollar-denominated one didn't?
The Fed's quarter-point hike lifted the dollar, so the loss showed up in currency rather than credit.
Did the week change the year's rankings?
No: Korea is still far ahead for 2026 and China internet is still deeply negative; only the week's ranking flipped.