Now you have every reason to pay attention to Taiwan

16 May 2023

The Taiwanese stock index Taiex has gained more than 12% since the start of 2023, making it the best performing stock market in Asia so far this year (as of 15 May 2023). Korea’s KOSPI is close behind at 9.7%.

MorningStar reported that 2022 ESG net annual inflow of $3.1B was well below the average $47B over the past 3 years. I think that mainly the negative broader market environment drove this, with a majority of sectors under performing in 2022. At the same time, ESG ETFs were typically underweight Energy, which was the top performer in 2022.

Taiwan’s Position Amid US-China Tensions

Like it or not, Taiwan has been caught up in tensions between US and China due to its unique geopolitical position. The impact on Taiwan can be both positive and negative.

Positive impact include:

1. Increased trade opportunities for Taiwan

As US-China tensions escalate and investors and companies look for alternative supply chains and consider diversifying their operations, Taiwan could benefit with its advanced technology sector and manufacturing capabilities.

2. More investment flows into Taiwan

Tensions in China and US may lead investors to reevaluate their trading strategies and capital flows. Many may diversify their portfolios or redirect investments into Taiwan based on geopolitical risks and market conditions.

3. Increased demand and supply for Taiwanese products

The intensifying competition between US and China in terms of emerging technologies such as 5G, AI and semiconductors could benefit Taiwan. Many investors consider Taiwan a global leader in semiconductor manufacturing, hence they see Taiwan as a good alternative supplier to Chinese suppliers. Taiwan therefore would benefit from an increased demand for its products and services in the technology sector.

That said, uncertainties are still present due to Taiwan’s delicate political situation and relationship with China. US-China tensions could negatively impact Taiwan’s stability which can still overall affect investor sentiment and confidence. Some negative impact could include:

1. Geopolitical Risks

Taiwan’s relationship with China has always been complex. The deepening political divide between Taiwan and China could introduce uncertainties. Taiwan has the potential to be a flash point in U.S.-China relations, so increased tensions between the US and China may impact Taiwan’s security concerns and regional stability.

2. Export dependence

Taiwan’s economy relies heavily on exports, particularly to China. If the tensions between the US and China result in trade disruptions or increased tariffs, Taiwan’s export-oriented industries could face challenges, impacting its economy. The potential for supply chain restructuring or relocation of manufacturing facilities from China to other countries could have mixed effects on Taiwan. If relations sour between Taiwan and China, Taiwan’s exports would be negatively impacted as well.

The Attractiveness of the Taiwan Futures Contract

The Taiwan Futures Exchange (TAIFEX) futures contract allows bi-directional trading. Investors and traders may find opportunities in both bull and bear markets and may take a long or short position depending on how they view the Taiwanese stock market.

For contract specs on TAIFEX futures, please click here.

FREE Seminar about Opportunities in Taiwan

On Tue 23 May at 6:30 pm, professional trader Wong Kon How, will share about the liquidity and growth potential of the Taiwanese market and how you can benefit from trading TAIFEX futures.

Date: Tue 23 May 2023

Time: 6:30 pm – 8:00 pm (includes buffet dinner)

Venue: Raffles City Tower Level 6 (above City Hall MRT station)

Register for the seminar here.

Trade Stocks, ETFs, Forex & Futures on Phillip Nova

Features of trading on Phillip Nova

Gain Access to Over 20 Global Exchanges
Capture opportunities from over 200 global futures from over 20 global exchanges

Trade Opportunities in Global Stocks
Over 11,000 Stocks and ETFs across Singapore, China, Hong Kong, Malaysia and US markets.

Over 90 Technical Indicators
View live charts and trade with ease with over 90 technical indicators available in the Phillip Nova platform

Trade Multiple Assets on Phillip Nova
You can trade Stocks, ETFs, Forex and Futures on a single ledger with Phillip Nova

Free Phillip Nova Demo Account

Fast and Secure Online Account Opening

An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

CFD is available for trading on Phillip MetaTrader 5 (MT5).

Features of trading CFD:

Trade in both the bull and the bear markets
The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
Smaller barrier to entry
Flexible and smaller contract sizes. This means that traders will be able to enter into a contract with a modest amount of capital.
No expiration date or risk of delivery
Unlike futures which commonly have a fixed expiration date, CFD allows traders to perpetually hold the position(s). CFD is cash settled, no need to worry about the delivery of the underlying asset.

Benefits of using Phillip MT5:

Trade at zero commission on a dynamic platform that offers low spreads. Integrated with Autochartist and Trading Central Indicators, and available on mobile, web and desktop app, you will never miss a trading opportunity with Phillip MT5.

Register for a FREE 30-day Phillip MetaTrader 5 Demo Account

More Market Trends

24 Feb 2025

Gold continues its remarkable rally, setting multiple all-time highs two months into 2025. Will gold reach the $3,000 milestone soon?

Client Portal