India, Taiwan, Korea and Brazil: access restrictions, capital controls, foreign-investor rules and valuation differences

What you will learn

• The foreign-investor regime of India, Taiwan, Korea and Brazil and which routes are open to a private investor in Germany.
• How capital controls and currency convertibility shape prices and premiums in each market.
• Country-level taxes that reduce even an ETF investor's return.
• Why valuation levels differ and how to compare them with the earnings yield gap.

Explanation

After China, these four countries are typically the largest weights in emerging-market indices. Facts are as of 2026; rules change often, so check them before acting.

India

Foreigners invest in Indian shares as foreign portfolio investors (FPIs) registered with the regulator SEBI through a local custodian. The route is built for institutions; a private person abroad who is not of Indian origin has no practical direct access and uses ADRs and GDRs of a few large companies, euro secondary listings, or UCITS funds (which are themselves FPIs). India also taxes capital gains of foreign investors at source, including foreign funds: since the July 2024 budget, listed shares held more than 12 months are taxed at 12.5 % and shorter holdings at 20 %. An India ETF therefore carries a tax drag that a US equity ETF does not. The rupee is not freely convertible offshore.

Taiwan

Foreign institutions register as foreign institutional investors (FINIs) with the Taiwan Stock Exchange via a local custodian; few brokers support individuals. The Taiwan dollar is tightly managed. From Germany you use ADRs (the largest Taiwanese chipmaker's ADR is one of the most traded foreign shares in the USA), euro listings and funds; because conversion is cumbersome, these ADRs have often traded at a premium (lesson 4). Taiwan's index is extremely concentrated: one company can be roughly half of a Taiwan ETF, a single-stock risk disguised as a country allocation.

Korea

Korea abolished its foreign investor registration certificate in December 2023, extended onshore currency trading hours in 2024 and lifted a long short-selling ban in 2025. The won's limited offshore convertibility remains, which is why MSCI still calls Korea emerging while FTSE calls it developed (lesson 1): a FTSE emerging-market ETF holds no Korea, an MSCI one holds a lot. Korean shares have long traded at lower valuations than peers, the "Korea discount", attributed to conglomerate (chaebol) structures, low payouts and weak minority rights; a government "Value-up" programme started in 2024.

Brazil

Brazil is open: foreign investors register through a local custodian, few sectors have ownership limits, and dozens of companies have liquid ADRs. The frictions are taxes and the currency. The IOF, a tax on financial transactions including currency conversion, is changed repeatedly by decree; check the current rate. From 1 January 2026 Brazil applies a 10 % withholding tax on dividends paid to non-residents, ending a long period of tax-free dividends. The real is volatile and Brazilian policy rates are among the highest in large economies, which makes hedging it very expensive (lesson 3).

Why valuations differ

Price-to-earnings (P/E) ratios of these markets have differed for decades: India high, Korea and Brazil low, Taiwan in between but dominated by one sector. Three durable reasons: (1) local interest rates: when bonds yield 12 %, shares must offer a high earnings yield, so P/E ratios are low; (2) governance and payout: investors pay less for earnings they may never receive; (3) growth expectations and domestic savings flows, as in India, support high multiples. A quick comparison tool is the earnings yield gap: earnings yield (1 ÷ P/E) minus the local 10-year government bond yield. It does not forecast returns, but it shows whether a market is expensive relative to its own alternatives.

Worked example

Hypothetical example with invented figures for three markets:

Step 1: Country B looks "cheap" on P/E (8 versus 22) but relative to its own bonds is almost as expensive as Country A. Step 2: Country C's gap of +7 points shows that its low multiple is not explained by interest rates; look for governance or payout reasons (lesson 8). Step 3, tax drag: a UCITS ETF realises €10,000 of long-term gains on Indian holdings; at 12.5 % it pays €1,250 to India before anything reaches you, 1.25 % of a €100,000 position. Exclusions: fund fees, German taxes, currency effects.

Common mistake

Practice activity

On paper: a market trades at a P/E of 25 and its 10-year bond yields 7 %. (a) Compute the earnings yield and the gap. (b) Another market has a P/E of 9 and a bond yield of 11 %; compute the same and say which market is more expensive relative to its own bonds. (c) Name one access or tax friction for each of India, Taiwan, Korea and Brazil.

Key takeaways

• India and Taiwan channel foreigners through institutional registration; private investors in Germany reach them via ADRs, euro listings and funds, and India taxes capital gains of funds at source.
• Korea has dismantled most paperwork but keeps a non-convertible currency, so MSCI and FTSE still disagree on its status.
• Brazil is open but taxes: 10 % dividend withholding for non-residents from 2026 and the changeable IOF; its high rates make hedging the real costly.

Next step

Lesson 7 turns from equities to emerging-market bonds: hard-currency versus local-currency sovereign debt, spreads, default history and the ETFs that hold them.