Author: Ye Maisui
On April 15th, opening the market software, the market exploded again—the Nikkei 225 index surged to a high of 58,585.95 points, approaching a historical high. At the same time, the Korean KOSPI index also stood firm above 6,000 points, with the former rising 15.5% this year and the latter soaring 45%, showing a clear profit effect.
Some people shared screenshots of their earnings from Japan-Korea related ETFs, exclaiming &#34;I hit the right rhythm,&#34; while many newcomers were asking, &#34;Is it still too late to get in? Which ETF should I choose?&#34; Xiaoquan immediately contacted industry experts, and today, through this diary, let's have a good chat about this wave of the Japan-Korea stock market bull market and the ETF investment strategies that domestic investors are most concerned about.
Korean Index Rises by 45%
First, let's talk about the underlying reasons for the recent surge in the Japan-Korea stock markets, which is not just a &#34;bubble&#34; that appeared out of nowhere, but is backed by solid logic.
Starting with Japan, the Nikkei 225 index has seen a cumulative increase of over 15% this year, marking the best start since 1990. The core driving forces are threefold: first, the Bank of Japan maintains an accommodative monetary policy, with interest rates remaining low for a long time, resulting in ample market liquidity and a large influx of funds into the stock market; second, Japanese corporate profits continue to improve, especially in core industries such as semiconductors, automobiles, and precision manufacturing, benefiting from the recovery of global supply chains and technological upgrades, with impressive performance; third, foreign capital continues to bottom-fish, as global capital is optimistic about the prospects of Japan's economic recovery, continuously increasing their holdings in Japanese stock market assets, forming a dual benefit of &#34;capital + performance.&#34;
Now looking at Korea, the KOSPI index has also been &#34;fully buffed&#34; recently. As of Wednesday's close, the index has risen 44.55% this year, making it the most profitable market of the year, without exception. Before 2024, the Korean Composite Stock Price Index had actually hovered around 2,500 points for many years.
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According to Bloomberg statistics, the total scale of the Korean stock market has risen to become the ninth largest stock market in the world, following major markets such as the United States, China, Japan, the United Kingdom, India, and Canada.
Why is the performance of the Korean stock market so vigorous? The market believes that three main factors are working together: corporate earnings growth; government-driven reforms requiring listed companies to improve shareholder returns and governance to enhance valuations; and an influx of investor funds.
First is corporate earnings growth. The explosion of GPU computing power has driven the demand for high-bandwidth memory (HBM), combined with rising memory prices for consumer electronics such as mobile phones and computers, leading to a surge in the stock prices of Samsung Electronics and SK Hynix. These two companies together account for nearly 40% of the market value of the Korean stock market, boosting the index.
Another important factor contributing to the prosperity of the Korean stock market is the improvement in corporate governance leading to enhanced valuations, gradually eliminating the previous widespread &#34;Korean-style discount.&#34; For decades, the Korean stock market has been in a continuous &#34;valuation discount&#34; state, with the price-to-book ratio remaining below 1, a situation caused by Korean listed companies' long-term lack of dividends and buybacks
Starting from February 2024, the South Korean financial sector has officially decided to emulate Japan by implementing a corporate value enhancement plan, determined to address the issue of low stock valuations in South Korea. It requires listed companies to increase shareholder returns and improve governance to enhance valuations, with specific measures including tax reductions for companies that increase dividends and share buybacks.
According to data from the Korea Exchange, the total dividends of companies in the KOSPI index grew by 12% in 2024, reaching 44 trillion won. Stock buybacks more than doubled that year, reaching 18.7 trillion won. More importantly, to further boost the stock market, the South Korean National Assembly passed a long-debated legal amendment requiring listed companies to cancel treasury shares.
The newly elected South Korean President Lee Jae-myung, who took office in 2025, explicitly stated during his campaign the goal of reaching 5,000 points on the KOSPI index during his term. To demonstrate his determination, just days before the election, Lee Jae-myung purchased ETFs worth 40 million won (approximately 27,600 USD) and promised to invest 1 million won monthly for five years after taking office.
The third point, which is also very important, is that in April last year, the South Korean government launched the &#34;Foreign Investment Access Reform&#34; to attract foreign capital into the market. Core measures include: lifting restrictions on foreign ownership ratios, simplifying the foreign account opening process (shortening it from 7 days to 1 day), and reducing foreign transaction taxes (cutting the transaction stamp duty from 0.3% to 0.1%). As a result, South Korea has entered a nationwide stock trading mode. By the end of January this year, the number of active trading accounts held by South Korean investors reached 124.5 million, an increase of 1.73 million year-on-year, doubling compared to 2021.
How to Invest in the Japanese and South Korean Stock Markets
Watching the Japanese and South Korean stock markets soar, many domestic investors are eager to get a piece of the action.
But here comes the problem: domestic investors cannot directly open accounts in the Japanese and South Korean stock markets. Are they just going to watch the opportunity slip away? Of course not! The most convenient and lowest-threshold way is to participate indirectly in this bull market through Japan and South Korea-related ETFs listed domestically—this is also the choice of most investors, as it does not require cross-border currency exchange or familiarity with overseas market rules, and investments can start from 100 yuan, making it easy for ordinary people to participate.
However, the market is flooded with various Japan and South Korea-related ETFs, and not all of them guarantee easy profits; choosing the right targets is key. I have compiled a detailed breakdown of the most discussed and noteworthy ETFs, along with their characteristics, so that even beginners can easily understand.
First, focusing on Japan's stock market, there are ETFs tracking the Nikkei 225 Index and the TOPIX Index. Both have some overlapping stocks, with the Nikkei 225 Index comprising 225 constituent stocks, while the TOPIX Index includes over 2,000 constituent stocks. Relatively speaking, the TOPIX Index has a more balanced industry distribution due to the larger number of included stocks.
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<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O0S06ujPEH-uFQX_Y8cpU1kpu6dvWC_eWikL6zSUQfpUAAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O0S06ujPEH-uFQX_Y8cpU1kpu6dvWC_eWikL6zSUQfpUAAA/641"/>
In addition to passively tracking indices, there is also an actively managed QDII fund, which is the Morgan Stanley Japan Select Equity Fund.
Now let's take a look at the ETFs related to South Korea. The currently available ETF involving South Korea is the China-Korea Semiconductor ETF. According to its holding data, the top two holdings are both from South Korea, namely Samsung Electronics and SK Hynix, which account for 16.46% and 15.59% of the fund's total market value, respectively. Additionally, there are semiconductor stocks listed on the A-share market, such as Cambricon and SMIC. Since the beginning of this year, the secondary market increase of this fund has exceeded 48%.
However, here I would like to remind all friends in the circle that when investing in ETFs, especially cross-border ETFs, there are several important points to note. First, ETFs themselves are risk assets, and fluctuations are normal; one cannot only focus on the upside while ignoring the downside risks. For example, the maximum drawdown of the aforementioned China-Korea Semiconductor ETF this year reached 29%, so investors should be aware of the risks.
Additionally, there are situations of premium and discount in on-exchange ETFs. Taking the China-Korea Semiconductor ETF as an example, its current net value is approximately 3.42 yuan, while the on-exchange price is 3.815 yuan, resulting in a premium rate of 11.59%.
The third point is that exchange rate fluctuations can also impact investment returns. Most Japan and South Korea ETFs listed domestically are priced in RMB, and exchange rate fluctuations will directly affect returns. For instance, when the Japanese yen depreciates, even if the Nikkei index rises, the ETF's net value may still decline. Therefore, when investing, one should also pay attention to the exchange rate trends of the yen and won to avoid losses due to exchange rate fluctuations.
Finally, I want to emphasize that investing carries risks, and one should proceed with caution when entering the market

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Recently, the Japanese and South Korean stock markets have surged significantly, with the Nikkei 225 index rising by 15.5% and the KOSPI index increasing by 45%. The main factors driving the rise in the Japanese stock market include the Bank of Japan maintaining an accommodative monetary policy, improvements in corporate earnings, and continued foreign investment. The South Korean stock market has performed strongly due to growth in corporate performance, government reforms, and capital inflows. Investor interest in Japan and South Korea-related ETFs has increased, with discussions on how to participate in this bull market

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Japanese and South Korean stock markets surge, how should investors get on board?