Despite being one of the largest country weights in the
iShares MSCI Emerging Markets Index Fund (NYSE:
), the Vanguard MSCI Emerging Markets ETF (NYSE:
) and scores of other multi-country
, it sure feels like Taiwan has been flying under the radar as of
Even as Chinese stocks have
rebounded over the past several months
, Taiwanese issues have been stagnant. Over that time, the
iShares FTSE China 25 Index Fund (NYSE:
) is up five percent while the iShares MSCI Taiwan Index Fund
) is up just 1.2 percent.
Part of the reason for the lethargy of EWT and the names it
tracks is weakness in the technology sector, which accounts for
nearly 56 percent of EWT's weight.
"In the semiconductor business, for example, inventory levels
have surged recently, resulting in lower capacity utilization
rates, which are generally associated with less pricing power for
companies, and posing near-term headwinds," iShares Global Chief
Investment Strategist Russ Koesterich said in a note. "Meanwhile,
weak global capital expenditures and sagging consumer demand adds
pressure on the personal computer market."
Weakness in the semiconductor sub-sector is bad news for EWT
because the ETF is home to several chip names. Taiwan
) is the fund's largest holding with a weight of over 20 percent.
Inflation has also been a problem.
"For the past three months, headline inflation measures have
been persistently above the 2% inflation target set by the
central bank, a result of higher fuel, electricity and food
in reducing his rating on Taiwan to Neutral from Overweight.
Bolstering the bear case for Taiwan is a premium market
valuation. EWT has a price-to-earnings ratio of 20.5 and a
price-to-book ratio of 2.32. That implies Taiwan is far pricier
than China and the broader emerging markets universe
as measured by EEM
With the global economy still tepid at best, Taiwan's
dependence on exports has been exposed. However, there is another
side to the story. The country was recently 16th-best country for
. The International Monetary Fund is projecting Taiwanese GDP
growth of 3.9 percent next year, a stark improvement from the
1.05 percent growth the government expects this year.
Investors looking for Taiwan exposure without making a full
commitment as required by EWT should consider the falling
iShares Emerging Markets Dividend Index Fund (NYSE:
Based purely on the fact that emerging markets firms are
are becoming better dividend payers
, the iShares Emerging Markets Dividend Index Fund is
On that note, Taiwan has long been one of the preferred
destinations in the developing world for income investors so it
is not surprising to see the country dominate DVYE with a weight
of over 22 percent. The fund debuted in February and has thus far
accumulated almost $49 million in assets under management. DVYE's
30-day SEC yield is 5.11 percent.
Income investors seeking Taiwan exposure should also consider
the WisdomTree Emerging Markets Equity Income Fund (NYSE:
) and the SPDR S&P Emerging Markets Dividend ETF (NYSE:
WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:
The WisdomTree Emerging Markets SmallCap Dividend Fund's name
might imply a level of risk that some investors do not want to
take because it combines emerging markets and small-caps. What is
important to note, however, is that DGS devotes over a third of
its weight to Taiwan and South Korea. Those are two of the least
volatile emerging markets and that assertion is borne out in the
For example, the aforementioned iShares MSCI Taiwan Index Fund
less volatile this year than VWO, FXI and the Market Vectors
Indonesia ETF (NYSE:
), just to name a few. DGS itself is also less volatile than all
those funds, including EWT. The fund has 30-day SEC yield of 3.4
IndexIQ Emerging Markets Mid Cap ETF (NYSE:
Unknown to many investors, the IndexIQ Emerging Markets Mid Cap
ETF has been a solid performer this year with a gain of over 11
percent. EMER is something of a dichotomy. At the sector level,
financials and consumer discretionary names combine for over 42
percent of the fund's weight. That gives EMER a high-beta
On the other hand, EMER is by no means ultra-risky because
Taiwan and South Korea combine for nearly 41 percent of the ETF's
country weight. Taiwan alone represents over a quarter of the
fund's weight. Year-to-date and over the past 90 days, EMER has
been a better bet than EWT.
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