Some other single-country emerging markets exchange traded funds have delivered more jaw-dropping performances this year, but the iShares MSCI Taiwan ETF (NYSEArca: EWT) undoubtedly impresses with a year-to-date gain of almost 19%. That is better than double the return of the MSCI Emerging Markets Index, in which Taiwan is one of the largest country weights.
A year-to-date gain of nearly 19% for the largest Taiwan ETF is made all the more impressive when considering the ETF’s low beta reputation. EWT has, at various points during its almost 16-year history, been a favorite among investors seeking single-country exposure to developing economies because Taiwan is one of the least volatile emerging markets.
EWT has a smart beta rival in the form of the First Trust Taiwan AlphaDEX (NYSEArca: FTW).
“FTW’s benchmark index selects securities from the NASDAQ Taiwan Index and seeks to generate positive alpha by using the AlphaDEX methodology. Under normal market conditions, FTW invests at least 90% of its total net assets in American depositary receipts (ADRs), common stocks and global depositary receipts (GDRs) comprising its underlying index,” adds Investopedia.
FTW is up 12.5% this year.
“Taiwan is a buy. The government sector is net adding to the private sector and always has. After years of declining net adding the government has recently reversed policy and begun a cycle of expansionary economically supportive budgetary spending. There appears to be a ten-year pattern to government spending in Taiwan, and we appear to be at the beginning of a new cycle of expansion,” according to a Seeking Alpha analysis of Taiwan and EWT.
Earlier this year, Taiwan’s newly elected President Tsai Ing-wen pushed for closer economic ties with Southeast Asia and a possible increase in smartphone orders.
“The local economy is further supported by a positive balance of trade and capital flows further net adding to the circular flow of income that will lift the local stock market index,” according to Seeking Alpha.
However, investing in Taiwan does not take China out of the equation.
“Taiwan exports 27.6% of GDP to China. But it has been shifting more to a service-oriented economy to accommodate China’s increasingly consumption-oriented focus. China’s consumption culture also drives one of Taiwan’s biggest industries—semiconductor production,” according to Barron’s.
For more information on Taiwan, visit our Taiwan category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.