ETFs focusing on Taiwan
Taiwan’s (EWT) stock markets have outperformed most major Asia Pacific markets in 2017 just behind India and China. Foreign investors are attracted to Taiwanese technology stocks given expectations of rising demand for their products. Taiwanese semiconductor companies like Taiwan Semiconductor (TSM) and Hon Hai are gaining traction for manufacturing equipment by global companies like Apple (AAPL), Samsung (005930.KS), Sony (SNE) and Nokia (NOK).
Given the recent rally in the Taiwanese market, investors might consider ETF plays from the space. While Taiwan has a substantial share in the various emerging market and Asia-Pacific equity ETFs, investors wanting to focus on Taiwan can consider the following ETFs.
- iShares MSCI Taiwan Capped (EWT)
- First Trust Taiwan AlphaDEX Fund (FTW)
The iShares MSCI Taiwan Capped ETF (EWT) invests in a basket of 90 Taiwanese equities. With $3.4 billion under management, this ETF is highly concentrated on two stocks – Taiwan Semiconductors (TSM) and Hon Hai (2317.TW). These two stocks make up nearly 32% of its holdings. The EWT ETF is heavily weighted towards the technology sector forming nearly 55% of its total portfolio. The top five sectors it invests in are technology, financials, basic materials, telecommunications and consumer cyclical. Year to date, shares of the EWT ETF have surged 16.1%.
The First Trust Taiwan AlphaDEX Fund provides investors concentrated exposure to China’s booming technology sector. The FWT ETF invests in a portfolio of 40 securities with each security forming less than 6% of its AUM. The technology sector makes up 49% of this ETF and its top holdings are Inotera Memories and United Microelectronics. It has an AUM of $3.5 million, as poor liquidity and high costs have kept investors away from this ETF. Year to date, this ETF has returned 14.3%.
While both funds have surged almost the same from a year-to-date perspective, investors are better off with EWT given its huge exposure to big names Taiwan Semiconductor and Hon Hai. These stocks are expected to gain the most on the launch of the iPhone 8.
