The Taiwan exchange traded fund could witness subdued returns next year as the Taiwanese government lowers its outlook due to a slowdown in exports.
The Taiwanese central bank is maintaining its benchmark rate for the 10th consecutive meeting after the government trimmed its economic forecast for the year to 1.74% from 2.31% earlier, pointing to a slower-than-expected 0.44% expansion in exports, Bloomberg reports.
"Taiwan's inflation is still low, so there's no need to raise the rate," Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd., said in the article. "With export data softening lately, growth prospects look bumpy. Considering the balance between growth and inflation, maintaining the key rate is the best call."
Exports comprised about 60% of Taiwan's gross domestic product in the third quarter, declined in September and October year-over-year due to diminished demand from China, the island's largest overseas market.
Taiwan and China have fostered closer relations, opening their borders to increased trade. Marcella Chow, an economist at Bank of America Merrill Lynch, though, cautions that a failure to pass a pact opening services sectors between Taiwan and China could cap next year's growth at 2.5%.
The statistics bureau projects the economy will expand 2.59% in 2014, lower than the previous 3.37% estimate.
The iShares MSCI Taiwan ETF (EWT) provides exposure to the Taiwanese equities market. The fund has a significant weight to the Taiwan Semiconductor at 19.7%, and the tech sector makes up 52.2% of the ETF.
"Taiwan's most important sector is technology - it is currently the world's largest supplier of contract computer chip manufacturing services and is a major producer of LCD panels, DRAM computer memory, networking equipment, and consumer electronics," according to Morningstar analyst Patricia Oey.
iShares MSCI Taiwan ETF
Max Chen contributed to this article.