China equity A-shares and Taiwan large-cap equities are the most popular exchange-traded fund sectors in Taiwan. A clear shift from long-only ETFs to leveraged and inverse (L&I) ones can be seen in both sectors, as investors look for new opportunities.
At the end of February, the L&I China A-share ETFs had TW$59.8bn ($1.96bn) in assets, while the non-leveraged ones only TW$53.2bn ($1.75bn).
Taiwan equity ETFs showed an even bigger difference, with TW$81.5 ($2.67bn) in L&I ETFs and TW$51.5bn ($1.69bn) in non-leveraged.
Assets in Taiwan-domiciled China A-shares and Taiwan equity ETFs
Data source: Morningstar. Data as of 28 February 2017.
Taiwan’s investors have taken to L&I ETFs like fish to water. Since the first L&I products were launched in October 2014, till the end of February 2017, funds of this type have accumulated TW$156bn ($5.1bn) in assets, according data from Morningstar.
While the assets in L&I ETFs peaked in September 2016 and have plateaued since then, they now account for 53.5% of all ETF assets.
Assets in Taiwan-domiciled ETFs
Data source: Morningstar. Data as of 28 February 2017.
Passive investing in general has gained traction among Taiwanese investors. In 2014, ETFs accounted for 12% of assets in investment funds, in February 2017, that share doubled to reach 23.5%.
Assets in Taiwan-domiciled ETFs as percentage of all fund assets
