The aggregate size of Exchange Traded Funds (ETFs) listed in Taiwan has grown to more than NT$3 trillion (US$94.34 billion) in the 20 years since the first ETF was traded on the local stock market in 2003, according to the Taiwan Stock Exchange (TWSE).
Speaking at the opening ceremony of a two-day exhibition to mark the 20th anniversary of ETF trading in the country, TWSE Chairman Sherman Lin (林修銘) said on Friday that the local ETF market has grown rapidly over the past two decades, rising from NT$3.5 billion in the first year to more than NT$3 trillion, the second highest in Asia after Japan.
In addition to the fast growing size, the number of investors favoring ETFs has almost quadrupled from 1.64 million to 6.54 million over the past few years, Lin said, adding one in four people in Taiwan have invested in an ETF.
An ETF, which operates like a mutual fund, serves as a type of pooled investment security and typically tracks a particular index, sector, commodity or other asset. However, an ETF can also be bought or sold on a stock exchange as a regular stock.
In Taiwan, Lin said, ETFs demonstrate innovation and diversification in financial instruments and universal financing as the funds cover a wide range of product categories such as a fund tracking market capitalization and industries, such as low carbon emissions and electric vehicles.
Lin added a fund is constructed by using various derivatives to profit from an increase or a decline in the value of an underlying benchmark, and a fund also seeks to promote ESG (environment, social and governance) principles.
The underlying targets of ETFs included stocks, bonds and futures to meet demand from various investors including small investors, Lin said.
To help investors choose ETF products that suit their needs, the TWSE launched a new one-stop ETF information platform on Friday, he said.
Echoing Lin, Financial Supervisory Commission Chairperson Huang Tien-mu (黃天牧) said at the opening ceremony that ETFs have become a popular investment instrument in Taiwan due to their relatively low cost, risk diversification and the convenience of investing.
In particular in 2019, a big year for Taiwan's ETF market, the size of ETFs tracking the bond market rose by about NT$950 billion from the end of 2018, a major milestone for the domestic asset management business, according to Huang.
The International Organization of Securities Commissions (IOSCO), an association of organizations that regulates the world's securities and futures, unveiled the Good Practices Relating to the Implementation of the IOSCO Principles for ETFs in May in a bid to establish a volatility control mechanism to manage ETF trading in an effort to build a healthier market and protect investors, Huang said.
Also speaking at the opening ceremony, President Tsai Ing-wen (蔡英文) said through ETF investments, young investors are able to invest in the top 50 companies in terms of market capitalization in Taiwan as part of the country's efforts to boost the local equity market.
Tsai said that since the beginning of her first term as president in 2016, the Taiex, the weighted index on the Taiwan Stock Exchange, has soared more than 9,000 points to hover around 17,000 points in recent sessions. On Friday, the Taiex closed at 16,601.25 points.
The government is determined to continue to help enterprises raise funds from the market, reinforce investment education for the public and encourage investors to pour funds into companies that put much effort into ESG development, Tsai said.
In June, the Yuanta/P-shares Taiwan Top 50 ETF, the first ETF launched in Taiwan, celebrated its 20th anniversary. It was listed on the local main board on June 30, 2003, to track the performance of the Taiwan 50 Index, which consists of the largest 50 companies in terms of market cap, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) and iPhone assembler Hon Hai Precision Industry Co., also known as Foxconn, the top two stocks on the local market.
From its debut to the end of May, the Yuanta/P-shares Taiwan Top 50 ETF has yielded a return of more than 550 percent, including cash dividend payments, and its fund size had topped NT$300 billion as of May 30, up from NT$200 billion in March 2022, according to Yuanta Securities Investment Trust Co., which issued the ETF.
Currently, the ETF has about 677,900 investors, Yuanta Securities Investment Trust said.
