With the Taiwanese equity market challenging its early July highs, we have seen a pick-up in activity in typically infrequently traded EWT (iShares MSCI Taiwan, Expense Ratio 0.61%) options.
Yesterday the September 16 puts traded in good size, with the ETF trading back up near its $16.45 intraday high from early July, and it appears that someone may be hedging longs against a potential pullback in the near
term, if not outright bearishly speculating on Taiwan.
The fund has seen modest inflows year to date of about $25 million, putting its asset base above $3.2 billion and making it the third largest “Asia Pacific Equity” fund listed in the U.S. marketplace behind two other iShares
products EWY (iShares MSCI South Korea, Expense Ratio 0.61%) and EPP (iShares MSCI Pacific ex-Japan, Expense Ratio 0.50%) which have $4.8 billion and $3.4 billion in AUM respectively.
Honing in on Taiwan moreso, EWT is one of only two ETFs focused specifically on equity exposure to the country, being many times the size of the other fund in the space, the lesser known FTW (First Trust Taiwan AlphaDEX, Expense Ratio 0.80%) which debuted in 2012.
FTW only has about $7.7 million in comparison to the larger and more established EWT, but the fund has posted notable out-performance head to head year to date, with a slight overall edge in comparative gross performance since inception.
Trading activity has not only increased in EWT lately but also to some degree in FTW, as we see larger volume days in the past ten-twelve sessions or so, but not necessarily a day over day increase in trading volume in the product.
Fund flows in FTW, like EWT, remain modest year to date (+$5 million). EWT being market cap-weighted, has notable holdings differences among its top five positions compared to FWT (which employs the quantitatively based AlphaDEX methodology in a modified equal-weight process).
EWT can be sensitive to its overall weighting in Taiwan Semiconductor (>19.7% of the portfolio), with the company not slated to report quarterly earnings again until 10/15/14. Other top five holdings in EWT are Hon Hai Precision (>7.6%), MediaTek Inc. (>4.4%), Cathay Financial Holding (>2.7%), and Delta Electronics Inc. (2.5%), and FTW in comparison looks like the following: (AU Optronics Corp. (>4.5%), Far Eastern New Century Corp.
(>4.4%), Nanya Technology Corp. (>4.3%), Innolux Corp. (>4.3%), and Largan Precision Co. (>4.1%).
iShares MSCI Taiwan ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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