The benefits of the technology sector strength driven by mature, cash-rich firms are not confined to U.S. sector exchange traded funds.
Taiwanese equities are getting a major boost from investors flocking to mature tech names. In turn, global investors are also flocking to Taiwanese stocks. “Global money managers have pumped in $9.6 billion so far this year, more than three times the $2.7 billion total for all of 2013,” report Aries Poon and Fanny Lie for the Wall Street Journal.
Among Asian markets, only India has seen a great influx of cash from global investors than Taiwan. Over the past 90 days, the iShares MSCI Taiwan ETF (NYSEArca: EWT) is up 11.6%, though that trails the performances over the same period by the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM). [Taiwan ETF Looks Good Compared to Asian Rivals]
Taiwan is VWO’s second-largest country weight at 13.8% and the third-largest country allocation in EEM at 11.9%.
As the Journal notes, demand for new gadgets from tech giants such as Apple (NasdaqGS: AAPL) is boosting Taiwanese components makers, including Taiwan Semiconductor (NYSE: TSM). Taiwan Semiconductor is EWT’s largest holding at a weight of 21.1%, nearly triple the ETF’s allocation to its second-largest holding, Hon Hai Precision Industry, also known as Foxconn.
Taiwan Semiconductor looming large in EWT underscores an important point about the ETF. Unlike many single-country emerging markets ETFs, EWT is not excessively weighted to energy, financial services or materials stocks. EWT does, however, feature an almost 58% weight to the tech sector. [Time for the Taiwan ETF]
While financials and materials combine for 27% of the fund’s weight, EWT remains one of the most docile plays among single-country emerging markets ETFs. The ETF has a beta of 0.55 and a three-year standard deviation of 16.4%, according to iShares data.