Let’s analyze one of the best ETFs to take a position on Taiwan’s stock market. Let’s go into detail about every single pros and cons.
In 2022, Taiwan’s real GDP grew by approximately 2.35%. Over the past decade, the Taiwanese economy has shown remarkable stability, averaging growth of 3.1% between 2012 and 2022. This robust performance was primarily driven by the positive development of high-tech industries, particularly in the electronics sector, and its integration into global value chains.
These industries have one more added value for Taiwan: they prevent an invasion from Mainland China, given how much Beijing relies on them.
In this article we will analyze the ETF with the largest capitalization on the market that invests in Taiwan, highlighting the pros and cons of the product.
iShares MSCI Taiwan UCITS ETF
The iShares MSCI Taiwan is an ETF that replicates the performance of the MSCI Taiwan 20/35 index. This passively managed fund offers investors the opportunity to participate in the Taiwanese stock market, focusing on large- and mid-cap companies.
The iShares MSCI Taiwan UCITS ETF has assets under management of approximately €285 million, which indicates significant size, although it is not among the largest ETFs available on the market.
It adopts a full physical replication strategy, so it buys all the components of the underlying index to try to closely track the performance of the latter. The ETF’s distribution policy is distributing, meaning the dividends generated by the underlying stocks are distributed to investors semi-annually.
Synthetic Expenditure Indicator (TER)
The total expense ratio (TER) of the iShares MSCI Taiwan UCITS ETF is 0.74% per annum, not among the lowest for the reference market. This represents the total cost to investors holding the ETF, which includes management fees, transaction fees, and other related expenses.
Return and Risk
Looking at the historical performance of the iShares MSCI Taiwan UCITS ETF, we see that the fund has generated positive returns over the years. The YTD (Year-to-Date) return is +16.01%, while the annual return is +9.71%. Over the last five years, the ETF has posted an impressive total return of +99.27%. However, it is important to note that in 2022, the ETF suffered a loss of -25.01%, demonstrating that investing in stock markets, and this market in particular, involves a certain degree of volatility and risk.
Portfolio Composition
The iShares MSCI Taiwan UCITS ETF has a significant distribution of holdings within its portfolio. The top 10 holdings represent 53.46% of the total, indicating moderate diversification. Major holdings include:
- TWN SEMICONT MAN (30.80%)
- HON HAI PRECISION INDUSTRY (4.92%)
- MEDIATEK INC (4.23%)
- QUANTA ORD (2.46%)
- DELTA ELECTRONIC ORD (2.40%).
These companies represent a variety of industries, including information technology, finance, and commodities.
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Geographical and Sectoral Diversification
Geographically, the iShares MSCI Taiwan UCITS ETF is highly focused on Taiwan, with 97.97% of investments in the country. Only 2.03% of the portfolio is invested in other markets. This indicates that the ETF offers very specific exposure to the Taiwanese stock market.
Regarding sector diversification, the fund is heavily weighted in the IT sector, which represents 65.99% of the portfolio. Other sectors represented include finance (16.68%) and raw materials (5.46%). This composition reflects the importance of the technology industry in Taiwan.
Risk and Volatility
The ETF has some degree of volatility, with a 1-year volatility of 15.89%. However, it is important to note that this value is in line with that of emerging equity markets and can be considered acceptable given the nature of the underlying asset. The 1-year risk-return is 0.61 and indicates a reasonable return in relation to the risk taken.
Another important aspect to consider is the maximum drawdown, which represents the maximum loss suffered by the ETF in previous periods. The iShares MSCI Taiwan UCITS ETF has seen a maximum drawdown of -10.27% over the past year, -33.28% over three years, and -33.28% over five years. The maximum drawdown since the fund’s launch was -55.60%. These numbers highlight the importance of long-term planning and portfolio diversification to mitigate specific risks.
In summary, the iShares MSCI Taiwan UCITS ETF is an investment product that offers investors the opportunity to participate in the Taiwan stock market through a full physical replication strategy. Although it has generated positive returns over the years, it is important to note its volatility and maximum drawdown. Interested investors should carefully evaluate their investment needs and risk tolerance before considering this ETF as part of their portfolio.
| Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings. |
Original article published on Money.it Italy 2023-11-16 17:22:00. Original title: Il migliore ETF per investire a Taiwan
