ETF, multi-asset torrent tipped in Taiwan
Exchange-traded funds and multi-asset strategies look set to dominate product launches in Taiwan in 2016, with a focus on overseas markets such as China and Japan, said Henry Lin, president of Fubon Asset Management.
He told AsianInvestor he expected to see about 20 ETFs listed in Taiwan this year, including more tracking overseas stock markets, and these will include Fubon AM products. This would mean a 50% rise from the current 39 equity ETFs, 11 of which were launched last year, all linked to foreign markets. Taiwan fund managers listed the first ETFs providing exposure to developed-market equities in mid-2015, as reported.
ETFs have gained momentum in Taiwan in recent years given their relatively low cost, and local fund houses see this as area where they can compete with foreign players.
Foreign asset managers have an edge over local ones due to their sales approach in Taiwan and diversified investment strategies, said Lin, who is also chairman of the Securities Investment Trust & Consulting Association (Sitca). International fund houses are believed to pay higher commissions to distributors than their domestic peers.
It’s tough for domestic fund houses to compete with foreign firms on products investing in Europe or the US, noted Lin, but local players can have an edge when it comes to Greater China and passive products.
Meanwhile, he said 20-30 multi-asset funds were waiting for regulatory approval and will be more diversified than in the past, investing in more than one country or market. Fund managers will also adjust their investment strategies to ensure stable balanced income, Lin added.
As of the end of 2015 Taiwan had 51 locally domiciled balanced funds managing a total of NT$91.4 billion ($2.8 billion), an increase from 44 such funds totalling NT$66.6 billion the previous year, according to Sitca data.
Taiwan investors are very interested in overseas investment, even more so than Japanese investors, Lin said. Fubon AM hopes to capitalise on this interest next year by launching ETFs tracking Western markets, actively managed funds under the theme of China’s ‘one belt, one road’ initiative and real estate investment trusts.
And the firm is currently raising money for the March 29 listing of Taiwan's first ETF tracking India’s Nifty index, including two-times leveraged and inverse versions of the fund. It is targeting NT$3 billion during the IPO period, which will finish today.
Lin pointed to India's fast economic growth (7.5% last year), strong domestic demand, openness to foreign investment and the potential to be a major global manufacturing hub. He expects Indian stocks to stay relatively stable in the first half, as the five-yearly election of the Legislative Assembly will take place from April to May.
The Nifty has lost -6.01% year-to-date as of March 10 this year, as against a -19.23% fall in China’s CSI 300, an -11.47% drop in Japan’s Nikkei 225 and a +0.75% rise for South Korea’s Kospi.
Market-makers such as securities brokers typically take 10% to 30% of an ETF’s IPO volume in Taiwan, and sometimes as much as 50%, said Lin. Fubon said such liquidity providers will account for about 30% of the Indian ETF’s IPO volume.
Taiwan gave the green light to the first leveraged/inverse ETFs in 2014, and there are now six such funds listed. Yuanta SITC has products tracking the Taiwan 50, CSI 300 and S&P 500 indices; Fubon AM has ETFs offering exposure to the SSE 180 and Japan’s Topix; and Fuh Hwa SITC offers a Hang Seng index tracker.
Fubon AM managed NT$117.5 billion as of January 31, comprising NT$34 billion in MMFs, NT$41.2 billion in ETFs, NT$18.3 billion in actively managed funds and NT$24 billion in mandates, mostly for pension funds in Taiwan.
AsianInvestor will bring together Taiwanese investors and distributors for discussions on global investment opportunities at the Taiwan Global Investment Forum, to be held on March 22 in Taipei.