The Australian share market is not having one of its better years.
That does not mean there are no strong returns available. It may simply mean investors need to widen the lens.
For many Australian investors, the first step beyond the ASX is usually the United States. That makes sense. The US remains the world's largest economy and is home to many of the companies most closely linked to artificial intelligence, including Nvidia, Alphabet, and Micron.
The iShares S&P 500 ETF (ASX: IVV) has been one of the simplest ways for ASX investors to get that exposure. The fund seeks to track the performance of the S&P 500 Net Total Return Index in Australian dollars, before fees and expenses.
However, the US is not the only place benefiting from the next wave of global growth.
Closer to our shores, some country-specific ASX ETFs have been racing ahead of both the Australian market and the S&P 500 Index (SP: .INX). Two standout examples are the BetaShares Japan ETF – Currency Hedged (ASX: HJPN) and the iShares MSCI South Korea ETF (ASX: IKO).
The Vanguard Australian Shares Index ETF (ASX: VAS) remains a useful broad exposure to Australian shares. Yet over the past 12 months, HJPN and IKO have shown how powerful it can be to think globally.
Image source: Getty Images
Japan is back on the radar
The HJPN ETF has gained more than 53% over the past year.
The fund gives investors exposure to a diversified portfolio of large, globally competitive Japanese companies, while hedging currency exposure back into Australian dollars. BetaShares lists HJPN in the global shares category and notes its Japan focus and currency-hedged structure.
Japan has become one of the more interesting markets in the world for long-term investors.
After decades of deflation and lacklustre investor interest, the country is seeing a mix of catalysts emerge. Inflation has normalised, companies are being pushed to improve corporate governance, and more Japanese businesses are focusing on dividends, buybacks, and stronger capital allocation.
That is not just attracting retail ETF money.
Warren Buffett's Berkshire Hathaway has also increased its exposure to Japanese companies. The appeal appears to be a combination of compelling valuations, strong balance sheets, and more efficient use of capital.
In other words, Japan is not just a short-term trade. It may be a structural reappraisal of an overlooked market.
Korea is riding the AI supply chain
If Japan has been strong, South Korea has been explosive.
The IKO ETF has surged around 200% over the past 12 months, helped by massive gains in Korean semiconductor stocks.
BlackRock says IKO provides exposure to large and mid-sized companies in South Korea and can be used to express a single-country market view.
The key driver has been simple: artificial intelligence needs memory chips.
IKO has heavy exposure to Samsung Electronics and SK Hynix, two global leaders in memory semiconductors. These companies sit deep inside the AI infrastructure buildout, powering data centres, cloud computing, and high-performance computing demand.
This is where the phrase "skate to where the puck is going" matters.
Australian investors can own banks, miners, supermarkets, insurers, and infrastructure companies at home. Many of those businesses are excellent. But the ASX is light on the deepest parts of the AI supply chain.
Korea offers exposure to a very different part of the global economy.
The bigger lesson for ASX investors
The point is not that investors should chase the strongest ETF of the past year.
That can be dangerous. A fund that has surged 50%, 100%, or 200% can easily pull back. Country-specific ETFs can also be more concentrated than broad-market index funds.
However, the bigger lesson is important.
A diversified portfolio does not have to mean owning only the largest companies in Australia. It can mean owning baskets of countries, sectors, and themes that give investors exposure to where global earnings may be heading next.
The ASX remains a sensible starting point. The US remains a powerful global engine.
However, the Japanese and South Korean markets show that the investment world is far bigger than our own backyard — and far broader than the biggest names on Wall Street.
