Taiwan’s ETF assets reach $17.5 bn

Nov 21, 2018
Rise in ETF investment adds momentum to domestic market innovation

Taiwan Stock Exchange (TWSE) has said huge growth in new trading products such as exchange-traded funds (ETFs) is broadening options for investors across new and emerging indexes in the domestic market.

‘These ETFs are able to serve different investment purposes. Fixed-income ETFs serve as essential tool[s] for asset allocation, and foreign equity ETFs offer exposure to global equity market[s],’ said TWSE president Lih-Chung Chien during a keynote speech at a recent Asia Asset Management ETF conference in Taipei.

Taiwan currently has 142 listed ETFs, including 111 on TWSE and 31 on the Taipei Exchange. Since the launch in 2003 of Taiwan’s first ETF – the Polaris Taiwan Top 50 Tracker Fund – such funds have grown increasingly popular, reaching total assets under management of T$348 bn at the end of last year, and hitting T$541 bn in September 2018. The average daily turnover in ETFs, meanwhile, stands at around $270 mn so far this year, a 59 percent increase from 2017.

Jonathan Chiou, secretary general of the Taiwan Investor Relations Institute, tells IR Magazine that as investors continue to look for ways to access more products to diversify their portfolios at lower fees, a substantial increase in assets under management for passive products can be expected.

‘While this may pose a bigger challenge for IR practitioners in how they communicate with investors going forward, there are positives for increased ETF offerings as well,’ he says. ‘More indexed offerings can [provide] additional products for investors to diversify their holdings, and companies that are ahead of the ESG curve may see institutional ownership rise if selected as a constituent.’

The market in Taiwan is expected to grow even further, with TWSE planning to license new indexes to shore up more ETF investment. A recent example of this includes four new ESG-related indexes, some of which have been used by Taiwan’s largest public retirement scheme, the Labor Pension Fund, to benchmark institutional investors’ passive investment mandates. An approval from Taiwan’s financial regulator in June to introduce exchange-traded notes to the market will see the first of these products available in the second quarter of 2019.

‘Overall, we believe higher assets under management in passive investment products is a positive for the financial markets in Taiwan,’ Chiou concludes

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