Taiwan ETF is China Power Play

Global ETF investors looking for an indirect way to tap China economic growth should consider the Taiwan (EWT) exchange-traded fund.

The first aspect of the Taiwan ETF basket that investors need to be aware of is the large exposure to the semiconductor industry - close to 50%. But keep in mind that the vast majority of semiconductor manufacturing takes place in China. In fact, close to 20% of China's total exports come from Taiwanese firms. 75% of Taiwan's foreign investment also heads to China. More than 1 million Taiwanese actually live and work in China and 75,000 Taiwanese companies have invested there as well.

How is this for a China play?

How will Taiwan's upcoming presidential election affect the Taiwan ETF? Go to Chartwell ETF and find out. Is it a matter of tails you win, heads you win?

The Taiwan market is currently trading about 19 times projected earnings but its 2008 GDP projected growth rate is 4%. (EWT) is down 5.1% so far this year and was up yesterday 1.9% in morning trading while the iShares FTSE/Xinhua China 25 Index (FXI) is down 14.5% for the year.

Comments

[Johnc]

Not sure the election is such a slam dunk. Taiwan has serious issues to attend to if it wants to participate fully (think Hong Kong as an example of full participation) in the strong growth we all expect from China in the coming 5 to 10 years.
That said, the market is not discounting a positive turn from the election (in the past, presidential elections were good for 30% to 40% run-ups in the 12-15 months leading into the vote). Therefore any positive developments should lead to a bit of a rerating.
Taiwan is the Asian market most exposed to a US slowdown so a long or deep recession could detract from an otherwise attractive story of economic integration with China.
I have a position in EWT, so net net, I am bullish.