Investing, especially into exchange-traded funds (ETFs), will continue to find favour in Taiwan according to industry experts who shared their views at a webinar hosted by The Asset Events+ Taiwan Investment Series part one on Overcoming the Crisis, Capturing New Trends.
Although the outbreak of Covid-19 at the beginning of the year affected sentiment, investors have returned to the stockmarket with a vengeance driving up the Taiwan Stock Exchange index to close at nearly 12,400 this week, a 30-year record not seen since February 1990. One positive factor is Taiwan’s response to Covid-19.
“Taiwan has been able to control the Covid-19 virus spread successfully. Total positive cases are under 500, and in over 100 days there has been no new domestic cases. This has won investors’ confidence back, and Taiwan’s market has been able to recover quickly,” explains Ming Lee, president at Fubon Asset Management. “Taiwan’s GDP is forecast to grow by around 1.67% in 2020.”
In terms of approach, Taiwan investors no longer distinguish between active and passive strategies. “Institutional and retail investors deploy a hybrid strategy combining active [strategy] with ETF underlying products,” says Julian Liu, chairman of Yuanta SITC. “ETFs not only are able to help with stock selection, providers are also able to suggest to investors to use ETFs – over 200 ETFs in Taiwan – as underlying components to construct a suitable investment strategy.”
In terms of themes, one area that is gaining growing attention is ESG. “This year, we saw significant interest focussing more on the environment, rather than social and governance, due to conversations around global warming and Covid-19,” Liu continues. “I think sooner or later ESG investing will become the mainstream. Demand [is coming] from millennials for these types of ESG investment products. Baby-boomers, on the other hand, typically like to buy the flagship, blue chip or high dividend ETFs.”
In Taiwan, Yuanta SITC launched the first ESG ETF called the Yuanta FTSE4Good TIP Taiwan ESG ETF. Since its launch in August 2019, the Yuanta’s ESG ETF attracted an inflow of more than US$250 million.
Chanchai Samadder, head of product strategy at Lyxor ETF, concurs with Liu’s comments sharing his thoughts on Europe. “Investors know that in the long-term they have to be into ESG. They know what companies are better in environmental, social and governance, and they do outperform over the long-term.”
Another area that is seeing growing investor interest is in technology-led themes such as 5G, internet of things, and cloud computing that the panellists believe will feature in new ETF launches in the next 12 months. In addition, with the work-from-home becoming the norm, they also predict thematic ETFs such as in media, video games and ecommerce will emerge in the future.
“Our working and living styles will be changed due to Covid-19. It’s not only working from home but also entertainment from home now. I think the infrastructure around 5G and the applications like video games will become very popular after Covid-19,” believes Liu.
Lee says even before Covid-19, innovation and technology were areas that have been growing. “These areas were not affected by the pandemic. As a result, they are gaining more attention from investors. We do not think technology will change its long-term growth trend. It should receive even more inflows in the coming period. It is the story in Taiwan. TSMC is trading at a record-high level; Taiwan is rolling out its 5G platform this month, which will be a milestone for Taiwan’s telecommunications sector.”