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



IQ Canada Small Cap ETF


and the

IQ Small Cap South Korea ETF

(SKOR) - Get Report

. 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) - Get Report

, which holds Taiwanese large-cap stocks. The iShares fund allocates 60% to technology, with familiar names such as exporters

Taiwan Semiconductor

(TSM) - Get Report


Hon Hai Precision

, which makes parts for


(AAPL) - Get Report

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


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) - Get Report

is dominated by the two largest resource companies in Brazil:


(VALE) - Get Report



(PBR) - Get Report

. The

Market Vectors Brazil Small Cap ETF

(BRF) - Get Report

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.

A far more complicated risk factor is Taiwan's relationship with China. At times, it's contentious. Taiwan's eventual independence, or lack thereof, is unlikely to be resolved soon, which is a negative but hasn't prevented Taiwan from outperforming in bull markets.

At the time of publication, VALE was a client holding.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;

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