Most global equity portfolios are, in practice, a large position in the United States with smaller positions elsewhere. At the end of August 2026 the United States made up 72.14 per cent of the MSCI World Index, and information technology was its largest sector at 29.81 per cent.
Hong Kong and Korea are two markets that investors with that kind of portfolio sometimes examine. They offer different things. Hong Kong is mainly a route to Chinese companies, priced in a currency tied to the US dollar. Korea is a market of manufacturers and exporters, priced in a floating currency, with a government programme aimed at how its companies treat shareholders. Below we set out what each market is, how it works, what it means for a portfolio, and what would change our reading.
How the index providers classify each market
Observation. MSCI and FTSE Russell disagree on Korea. MSCI lists Hong Kong among its Developed Markets and Korea among its Emerging Markets, as shown in the country lists of the MSCI World and MSCI Emerging Markets index factsheets. FTSE Russell has classified Korea as a developed market since 2009, according to FTSE Russell research published in June 2026.
Mechanism. MSCI's view rests on market access. In its 2026 Market Classification Review, MSCI said it consulted on moving Korea to Developed status from 2008 to 2014, and that market participants identified the limited convertibility of the won offshore as a key barrier. It noted that the won is still not deliverable offshore, that adoption of omnibus accounts and in-kind transfers remains limited, and that investors face operational burdens under the compliance regime reinstated after the short-selling ban was lifted.
Implication. Where Korea sits depends on the benchmark. An investor measured against MSCI holds Korea inside the emerging markets sleeve, where it was 20.84 per cent of the MSCI Emerging Markets Index at the end of August 2026. An investor measured against FTSE indices holds it among developed markets. The same shares can be a large emerging markets weight or a small developed markets weight.
What would change the view. An MSCI consultation on reclassification would be the signal. MSCI states that such a consultation requires all issues to be addressed, reforms fully implemented, and enough time for investors to assess them.
Hong Kong as the access point to Chinese companies
Observation. Hong Kong's market is dominated by companies from the Chinese Mainland. On HKEX figures, Mainland enterprises were 58 per cent of listed companies and 79 per cent of market capitalisation on the Main Board and GEM at 31 December 2025.
Mechanism. HKEX counts two groups as Mainland enterprises. H-share companies are incorporated in the Mainland. Non H-share companies are incorporated elsewhere but controlled by Mainland entities or individuals. Stock Connect adds a second channel. It is a mutual market access programme: Shanghai Connect launched on 17 November 2014 and Shenzhen Connect on 5 December 2016, according to the HKEX Stock Connect FAQ. HKEX describes Northbound trading as giving international investors access to Mainland markets, and Southbound trading as letting Mainland investors trade in Hong Kong.
Implication. A position in Hong Kong equities is largely a position in Chinese companies. Through Northbound trading, Hong Kong is also the route into Shanghai and Shenzhen listings. Southbound trading means Mainland investors take part in Hong Kong price formation.
What would change the view. A material fall in the Mainland share of listings or market value, or changes to the scope of Stock Connect, would alter how we describe the market.
Korea's Corporate Value-up Programme and the Korea discount
Observation. On 26 February 2024 the Financial Services Commission set out the Corporate Value-up Programme with the Korea Exchange and other bodies. The programme is voluntary.
Mechanism. Under its guidelines, listed companies are advised to draw up value-up plans every year with a medium to long-term view, with the board playing a key role, to publish the plans on their websites, and to disclose them voluntarily to the Korea Exchange. The same release set out plans for a Korea Value-up Index of best practice companies, for exchange-traded funds that track it, and for the Korea Exchange to publish indicators such as price to book, price to earnings and return on equity. The Commission's guidelines define the Korea discount as "the tendency of Korean stocks to be valued lower than international counterparts". The Commission's programme release says the discount results from several factors in combination.
Implication. The programme targets one cause of the discount: how companies use capital and communicate with shareholders. Because participation is voluntary, results will vary by company. Company-level disclosure matters more here than the headline policy.
What would change the view. Firmer rules would strengthen the case that governance is changing. On 23 June 2026 the Financial Services Commission reported that the revised Commercial Act mandates the cancellation of treasury shares and requires companies to have treasury share retention and disposal plans approved at a shareholder meeting. A cabinet-approved revision to capital markets rules on the same day extends disclosure of treasury share holdings to all listed companies that hold them. Evidence that these rules are applied in practice would matter more than further announcements.
Currency: a linked dollar and a floating won
Observation. The two currencies behave very differently. The Linked Exchange Rate System has been in place since 17 October 1983, according to the Hong Kong Monetary Authority. Today it keeps the Hong Kong dollar within a band of HKD 7.75 to HKD 7.85 per US dollar. The Bank of Korea states that Korea moved to a free-floating exchange rate in December 1997.
Mechanism. Under the system, the HKMA stands ready to sell Hong Kong dollars to banks at HKD 7.75 and to buy them at HKD 7.85. It describes stability as coming from an automatic interest rate adjustment mechanism and its commitment to honour those undertakings. The two-sided band dates from refinements announced on 18 May 2005, which set it symmetrically around HKD 7.80. When money flows in or out and the rate reaches either edge of the band, the banking system's balances expand or contract, and Hong Kong dollar interest rates fall or rise until the rate moves back inside it. The won, by contrast, trades freely.
Implication. For a US dollar investor, Hong Kong equity returns carry little currency variation while the link holds. The cost is that Hong Kong interest rates are set by capital flows and the band, which leaves little room for local monetary policy. Korean equity returns carry an extra layer of won risk, in both directions.
What would change the view. Any change to the linked system would change the currency profile of every Hong Kong holding. For Korea, the currency issues MSCI raises, including offshore deliverability, bear on index status and on how easily the currency can be traded outside Korean hours.
Sector concentration in Korea
Observation. Korean equities are concentrated. As of May 2026, Telecommunications and Technology made up 72.2 per cent of the FTSE Korea Index, according to FTSE Russell. FTSE notes that Samsung Electronics is classified as a Telecom company, which inflates that industry's weight.
Mechanism. The weighting reflects the economy. FTSE Russell reports that semiconductors accounted for nearly 30 per cent of Korean exports in 2025 and that Korean firms control around 80 per cent of global supply of high bandwidth memory, a component used in AI servers.
Implication. For a portfolio already heavy in US technology, Korea can add to the same exposure to the technology and semiconductor cycle. Its diversification benefit is smaller than a country label suggests. We look at sector and factor overlap as well as country weights.
What would change the view. A broader index mix, such as a rising weight in financials, industrials or consumer companies, would make Korea a more distinct exposure.
Governance and policy risk
Observation. Both markets carry policy risk, of different kinds.
Mechanism. In Korea, the main questions are execution and market access. Value-up participation is voluntary, and MSCI's list of unresolved access issues is specific. In Hong Kong, the concentration of Mainland enterprises means that policy decisions in the Mainland, and relations between the Mainland and other major economies, feed directly into the earnings and valuations of much of the market.
Implication. In Korea, market access remains a live constraint. In Hong Kong, the concentration of Mainland companies ties much of the market to one policy environment. We size positions with that in mind, and treat policy events as a source of sharp price moves as well as of gradual change.
What would change the view. For Korea, sustained implementation of the access and governance measures. For Hong Kong, a sustained change in the policy relationship between the Mainland and its major trading partners.
How such positions can be held
Observation. There are two broad routes: direct holdings of listed shares and pooled vehicles such as index funds.
Mechanism. Direct holdings need a broker and custodian with access to the Stock Exchange of Hong Kong or the Korea Exchange. In Korea, MSCI's current access concerns include limited use of omnibus accounts and early pre-settlement funding requirements. Mainland A-shares can be reached through Stock Connect. Index funds that track MSCI or FTSE country indices give diversified exposure in one holding, and the Value-up plans include exchange-traded funds tracking the Korea Value-up Index.
Implication. The choice of vehicle affects cost, tracking, currency hedging, tax treatment and estate considerations. The domicile of a fund can matter as much as its holdings. These are structuring questions to settle before the market question.
What would change the view. Changes to market access rules in either market, or to the tax treatment of a given fund domicile, would change which route is most practical.
How we frame it
Hong Kong and Korea answer different questions in a US-heavy portfolio. Hong Kong is mainly a question about exposure to Chinese companies, with limited US dollar currency risk. Korea is a question about the technology cycle, governance reform and a floating currency. We assess each on its own terms, check how much it overlaps with existing holdings, and set position sizes by what a portfolio can hold through policy and currency shocks.
This article is general commentary on markets. It is not personal advice or a recommendation to buy or sell any security.