With the promise of better cross-strait relations after the election of a new leadership and precious few bright spots elsewhere in Asia, investors are turning to Taiwan for the promise of strong returns.

Indeed, it is the only significant market in non-Japan Asia that has gained since the start of the year and the prospects for the rest of the year seem promising. To capitalise on this, banks up and down the street are now starting to structure participation certificates to track the market's rise.

In early June, Merrill Lynch launched a HK$700 million ($90 million) certificate programme linked to its Taiwan New Opportunities Index, which comprises a basket of stocks selected by its equity research team in Taipei, headed by Sophia Cheng. The index tracks four industry sectors: China-focused, consumer, financials and property or construction. The basket is reviewed twice a year.

Since the start of March, the index has risen 36.5%, compared to less than 5% for the MSCI Taiwan Index. "The Taiwanese economy stands on the cusp of renewed growth following a period of underperformance," says Maranda Wong, head of Merrill's financial products group and equity structured solutions group.

The five-year notes are plain delta-one products, meaning they are unleveraged, low-strike call warrants that provide close to one-for-one tracking of the underlying index. There are two varieties of the certificates, with different minimum investment amounts: HK$20,000 or HK$50,000. They both have a strike price of 0.001 and charge a 1% index calculation fee. Merrill will act as the market maker.

"Delta-one is a good way for retail investors to participate in the Taiwan growth story," says Warren Huang, head of Hong Kong warrant sales and a VP of the equity structured solutions group at Merrill. "It's transparent and liquid, and quite like a fund because these certificates benefit from our team of researchers. The advantage is that the cost is much lower."

Citi has also recently listed its own set of five-year Taiwan participation certificates in Hong Kong, tracking three sub-sectors of the Taiex index: building materials and construction, electronics and finance. The certificates offer a one-year fee waiver and charge 1% thereafter.