Taiwan has joined a number of Asian economies which are determined to take all effective steps to systematically unwind many such emergency measures as were placed in order to combat the recession that recently rocked most world markets. Malaysia, New Zealand, Australia, India and Vietnam have respectively raised their interest rate; Singapore and China, among a few others, have also tightened their country’s monetary policies to some extent. With a number of European countries desperately scrambling to slash their spending, for the purpose of avoiding a full-scale debt crisis, and a foreseeable limited prospect for growth in the United States, Asia appears to emerge as the possible growth engine for the international economy. Under such circumstances, it is reasonable to expect that Asia will account for a much more significant for expansion of GDP in the coming years.
Taiwan ETF Options
Viewed from a historical point, unexpected hikes in the interest rate has sent many stock markets plunging, especially when investors opt to sell off most equities fearing that the higher costs of borrowing will limit their growth. On the other hand, in the post-recession environment, most investors generally believe that rate hikes are a positive development, as it indirectly reflects the confidence that the central banks have in the economic prospects of their respective countries. For the investors who seek exposure to the equities in Taiwan, there are numerous ETF options. Many funds available in various categories of the Asia Pacific Equities ETFs are commonly known to maintain a relatively moderate exposure. Two funds among these pure play on ETFs exclusively focus on local Taiwanese stocks.
iShares MSCI Taiwan Index Fund (EWT)
This Taiwan ETF specifically tracks the ongoing performance for the MSCI Taiwan Index, which is a benchmark made up of some of the largest and highly liquid Taiwan equities. The EWT owns nearly 120 holdings, of which the top ten alone account for almost 50% of its assets. Portraying the overall composition of the Taiwanese economy, EWT shows a strong tilt towards its technology sector, with the hardware stocks making up almost 43% of its assets.
IQ Taiwan Small Cap ETF (TWON)
Though this Taiwan ETF focuses exclusively on Taiwan stocks, the exposure that it offers significantly differs from the EWT. As apparent from its name, TWON focuses on mainly small cap stocks, while EWT shows a significant trend towards investment on large cap firms. Since most small cap firms depend more on the growth of their local economy, most investors consider that these products offer a wider exposure for ‘pure play’ in their local economy.
Compared to its established and larger counterpart, TWON adopts quite a different approach to investment in the Taiwanese market. The small cap Taiwan ETF tracks the IQ Taiwan Small Cap Index rather closely and presently holds around 100 securities. With a strong focus on the technology sector (30.3%), industrial sector (27.7%), and a range of diversified materials (18.3%), in similar manner as its counterpart, TWON has only allocated minimal investment in energy (0.8%) as well as the health care (0.5%) companies.