We have spent some time recently covering the Emerging Markets space and activity in benchmark ETFs like EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) and VWO (Vanguard Emerging Markets, Expense Ratio 0.18%), which has recently consisted of protective put buying and asset outflows in the two ETFs.
Taiwan has an 11.37% weighting in EEM and 10.91% weighting in VWO, and the single country ETF EWT (iShares MSCI Taiwan, Expense Ratio 0.59%) is impressively out-performing the broader EM index proxies both year to
date as well as in the trailing one and five year periods.
EWT has been around for quite a while, debuting in 2000 and having amassed $2.8 billion in assets under management. There are not a ton of investment alternatives in the ETF marketplace for exposure to Taiwan, as First
Trust offers the much smaller FTW (First Trust Taiwan AlphaDEX, Expense Ratio 0.80%) which employs the proprietary AlphaDEX weighting methodology, ending up with a much different looking index makeup than say a market cap weighted index like the MSCI Taiwan Index that EWT tracks.
FTW has a very limited track record, as it debuted in February of 2012 and the fund averages about 15,000 shares traded daily at this point. Both of these funds have a noticeable mega/large cap slant, with about 87% of the EWT’s portfolio residing in such names, where FTW has more than 93% of the index weighting in mega/large caps. However, looking at the top holdings of both funds, as one might expect, the names top down look different based on the two different index methodologies.
Keep in mind that unlike the market cap weighted EWT, FTW employs a semi-annual index reconstitution and re-balance so names tend to shuffle around more. Like all AlphaDEX funds, FTW scans through an index of Taiwan based equities and ranks the companies on metrics such as book value to price, cash flow to price, and return on assets, among others, and isolates the “top 40” stocks from this sub-universe for investment. EWT on the other hand owns more than 100 individual names that trade in, and are based in Taiwan.
EWT’s top holdings at the moment are Taiwan Semiconductor (21.83%), Hon Hai Precision Ind. Co. (5.91%), and MediaTek Inc. (3.43%) while FTW has its heaviest exposure to Hotai Motor Co. (Ltd.) (5.37%), Pegatron Corp (5.10%), and United Microelectronics Corp. (4.80%). For exposure to the country, it comes down to the investment manager’s desire and/or need for an active strategy and potential out-performance over time or a passive index approach.
iShares MSCI Taiwan ETF
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