This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Taiwan ETF Plays Up Booming Tech Industry

Stocks in this article: TWON EWT TSM

NEW YORK ( TheStreet) -- IQ Taiwan Small Cap ETF (TWON) is IndexIQ's latest small-cap country exchange traded fund.

The company has previously rolled out IQ Australia Small Cap ETF (KROO), IQ Canada Small Cap ETF (CNDA) and the IQ Small Cap South Korea ETF (SKOR). There are filings for more, including those that focus on Indonesia, Malaysia and Singapore.

Taiwan is dominated by tech stocks. This is evident in the composition of the new Taiwan Small Cap ETF as well as the longstanding iShares MSCI Taiwan Index Fund (EWT), which holds Taiwanese large-cap stocks. The iShares fund allocates 60% to technology, with familiar names such as exporters Taiwan Semiconductor (TSM) and Hon Hai Precision, which makes parts for Apple (AAPL) products. The new small-cap ETF allocates 30% to tech, 27% to industrials and 18% to materials, with other sectors bearing much smaller weightings.

The new ETF contains 99 holdings, the biggest of which are Ralink Technology Group and Radiant Opto-Electronics with weightings of 1.8%.

Because of the tech focus, the IQ Taiwan Small Cap ETF doesn't capture the story on the ground. For example, the large-cap iShares MSCI Brazil Index Fund (EWZ) is dominated by the two largest resource companies in Brazil: Vale (VALE) and Petrobras (PBR). The Market Vectors Brazil Small Cap ETF (BRF) allocates 30% to consumer stocks, or the items that Brazilians buy, thus capturing the story on the ground. The Taiwan Small Cap ETF allocates 11% to consumer stocks, leaving out a large segment of the economy.

That's not necessarily bad. For investment purposes, the country is probably best thought of as foreign technology exposure. Clearly, the iShares Taiwan fund is a direct play on this, while the small-cap could be thought of as benefitting more from the macroeconomic angle.

There are two risk factors in Taiwan. As a large player in the global technology industry, the country is vulnerable to a worldwide economic slowdown. A meaningful drop in demand for technology products, real or perceived, would hurt the country and, by extension, the stock market. During the bear market, the iShares Taiwan fund bottomed out with a 60% decline versus 55% for the S&P 500.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs