Yahoo Finance AI Hype Drives Taiwan ETFs' Inflows: Time to Invest or Not?
Investors are flocking to Taiwan ETFs in quest of an exposure to the artificial intelligence (AI) supply chain. Recent data from Taiwan's Financial Supervisory Commission (FSC) indicates that the value of the ETF sector reached T$4.74 trillion ($145.8 billion) as of March, marking a substantial 77% increase compared to the previous year.
This surge in value, breezing past the benchmark equity index's 20% rise during the same period, underscores the substantial inflows into ETFs. iShares MSCI Taiwan ETF EWT is up 6.5% so far this year (as of May 2, 2024) and added $309.7 million of assets in this timeframe. The fund EWT currently has $4.15 billion in assets. The fund is up 21.1% past year.
Risk of Market Reversal
The trend that has caught the attention of analysts and regulators amid a backdrop of uncertain market dynamics, as reported by Reuters, quoted on Yahoo. Concerns have been raised by regulators and ETF managers about the likely risks associated with China over Taiwan's status. If market conditions deteriorate on this geopolitical issues, less experienced investors hoping to jump on the AI bandwagon, may face significant losses.
The rapid pace of investment, often fueled by borrowed funds, has been a driving force behind the market's upward trajectory. But there is a chance of a sharp reversal, a concern voiced by many money managers who question the sustainability of Taiwan's stock market rally. Apart from geopolitical tension, any negative commentaries regarding AI could also trigger selloffs in Taiwan ETFs.
Investors should note that another Taiwan ETF Franklin FTSE Taiwan ETF FLTW too has added 21.4% past year but lost 4% past month (as of May 2, 2024). The fund EWT too has shed about 3.6% in the past one month.
Ant Caveat?
While some analysts, like Peter Hong, believe that Taiwan and U.S. ETFs in the tech sector may continue to trend upwards due to the growth potential of AI, others caution about the associated risks, as reported by Reuters. Regulators, like Hwang Howming of the Financial Supervisory Commission (FSC), emphasize a cautious approach to protect investors' interests.
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iShares MSCI Taiwan ETF (EWT): ETF Research Reports
Franklin FTSE Taiwan ETF (FLTW): ETF Research Reports
