Taiwan: The Next ETF Hot Spot?

January 03, 2008

The Taiwan Stock Exchange anticipates a wave of listings in the first half, an FT article says.

Some big changes are coming to the exchange-traded fund (ETF) landscape in Taiwan, according to a Financial Times article by Kathrin Hille that was published earlier this week. (You can find the article, "Taiwan to open up its capital markets," here.)

The Taiwan Stock Exchange has said that deals are in the works to list a wide array of ETFs within the next six months. The exchange currently lists just seven ETFs covering mainly the Taiwan stock market, with the first of them launched in 2004. Should the current plans come to fruition, the exchange's range of ETF offerings could multiply impressively and the ETF market would take on a far more international flavor. The FT article describes several deals now in development.

The Taiwan Stock Exchange is currently in talks with the Tokyo Stock Exchange about cross-listing both exchanges' ETFs, and it has signed an agreement with the Abu Dhabi Securities Market (ADSM) that encompasses plans for the two exchanges to jointly develop and list ETFs as well.

Société Générale, which already offers a number of ETFs on the Euronext Paris exchange, has detailed 10 different possible ETFs to list on the Taiwan Stock Exchange, while two more Taiwan firms are looking to list ETFs on their home exchange.

Fubon, a Taiwan-based asset manager, has plans to launch an ETF based on the MSCI Taiwan Index, which already underlies the U.S.-listed iShares MSCI Taiwan Index Fund (NYSE Arca: EWT); Fubon is responsible for one of the seven existing ETFs traded on the Taiwan Stock Exchange, the Fubon Taiwan Technology Tracker Fund. KGI Securities, another Taiwan-based firm, is working to list an ETF managed by South Korea-based Samsung Securities on the Taiwan Stock Exchange.

ETFs could provide the Taiwan Stock Exchange with a way to respond to and capitalize on domestic investors' increasing interest in foreign investment opportunities, rather than losing business to foreign stock exchanges. According to the FT article, Taiwan's capital outflows have increased in the past few years as a result of pension reform and deregulation in the asset management industry.

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