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This article was originally published on ETFTrends.com.
The major U.S. indexes were reeling on Tuesday following U.S. President Donald Trump saying he’s in no mad rush to make a trade deal with China, which caused the Dow Jones Industrial Average to fall over 400 points before settling for a 280-point loss at the close. Businesses in Taiwan were wary of both nations making a trade deal anytime soon.
Markets were lifted in October after both nations purportedly agreed to a “phase one” deal, but since then, a tangible deal has yet to materialize. Meanwhile, U.S. equities have may already been pricing in optimism that a deal would be done by December.
Businesses in Taiwan had the prescience to know that a deal could not happen anytime soon.
“Every company contact in Taiwan was definitely skeptical of a US-China trade deal, with the majority believing that trade tensions between the US and China will persist for years,” said Evercore ISI analyst Jaewoo Nakajima. “From Taiwanese companies’ viewpoint, even if there’s a rollback of tariffs, differences are irreconcilable between the US and China on fundamental economic issues such as intellectual property protection, Chinese govt subsidies to Chinese manufacturers, and discriminatory market access for foreign enterprises.”
Because many believe trade tensions will persist for years (and their implied assumption is that Trump will be re-elected in 2020), Taiwanese companies spoke of a ‘decentralized manufacturing’ and ‘two supply-chain systems.’ In the long run: There will be two dominant supply-chains in the world, one that’s US-centric and another China-centric,” he added.
Investors looking to invest in Taiwan can look at the iShares MSCI Taiwan ETF (EWT) . EWT seeks to track the investment results of the MSCI Taiwan 25/50 Index. The index is designed to measure the performance of the large- and mid-cap segments of the Taiwanese market.
Reasons to use EWT:
Exposure to large and mid-sized companies in Taiwan
Targeted access to the Taiwanese stock market
Use to express a single country view
Additionally, the fund uses a capping methodology is applied that limits the weight of any single component to a maximum of 25% of the underlying index.
Top 10 holdings:
Taiwan Semiconductor Manufacturing: 22.72%
Hon Hai Precision Industry Ltd: 5.88%
Mediatek Inc: 3.22%
Formosa Plastics Corp: 2.28%
Largan Precision Ltd: 2.26%
Chunghwa Telecom Ltd: 2.25%
Ctbc Financial Holding Ltd: 2.10%
Nan Ya Plastics Corp: 1.96%
Cathay Financial Holding Ltd: 1.86%
Uni-President Enterprises Corp: 1.81%
For more market trends, visit ETF Trends.
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