NEW YORK ( TheStreet) -- With a date finally set for a landmark trade-deal to be signed between Taiwan and China, investors may find that now is a good time to look at iShares MSCI Taiwan Index Fund ( EWT).

Scheduled to be signed Tuesday, the deal, known as the Economic Cooperation Framework Agreement, is already being hailed as the most significant economic agreement between the two parties in the past 60 years.

The bulk of the deal consists of reducing tariffs on more than 800 products.

All in all, the deal is expected to result in a $100 billion increase in two-way trade over the Taiwan Strait.

Although closer relations between Taiwan and China may make some politicians in Beijing and Taipei nervous, the trade deal is expected to be welcomed by businesses and subsequently by markets.

Investors can bet on the success of the new economic deal by using a China ETF such as iShares FTSE/Xinhua China 25 Index ( FXI) or Claymore/AlphaShares China Small Cap ( HAO). However, I think EWT would be a more direct play on the impact of the trade deal than HAO or FXI because its smaller economy will mean that the boost in trade will be more noticeable. With 120 holdings, EWT's largest two holdings command more than 20% of net assets in the fund. The first company, Taiwan Semiconductor Manufacturing ( TSM), specializes in making semiconductor equipment for a variety of electronic devices.

Because TSM accounts for 13.8% allocation of net assets, EWT will be affected by long and mid-term trends in shares of this holding. Recently though, this could prove to be a good thing as there has been a steady flow of positive news from the semiconductor sector as 2010 has progressed.

In a broader sense, EWT will generally receive direction from information technology companies since these represent a 60.9% section of the fund's sectoral allocation. The next largest sector in the ETF is financials, which account for only 14.4% of the fund's exposure.

The fund's second largest holding is Hon Hai Precision Industry. Foxconn, the company that was in the news recently for giving wage increases at electronic device manufacturing plants in China after a spate of worker suicides, is an important division of Hon Hai.

The company has large interests in China in terms of its production facilities and the company exemplifies the importance of cross-Taiwan strait relations in the business world, since many other Taiwanese companies also have factories in China where labor is cheaper.

The new trade deal, which will cut tariffs on the trade of products across the Taiwan Strait, should help to improve the flow of goods for this sort of company.

Furthermore, reduced tariffs will make it easier for Taiwanese companies to profit without relying on keeping wages at their current low levels.

This could have the effect of giving more room for wage increases at the many Taiwanese-owned facilities in China and in turn boost domestic consumption in China as workers will have more disposable income.

Overall, the agreement is timely as it will act as a sort of permanent stimulus package that will help to ensure that both the Taiwanese and Chinese economies continue to emerge with strength from the recession.

Improved trade between the two parties or even just the prospect of better business will not go unnoticed by markets and investors who are optimistic on the agreement can best bet on it with ETFs by using EWT. With a date finally set for a landmark trade-deal to be signed between Taiwan and China, investors may find that now is a good time to look at iShares MSCI Taiwan Index Fund ( EWT).

Scheduled to be signed Tuesday, the deal, known as the Economic Cooperation Framework Agreement, is already being hailed as the most significant economic agreement between the two parties in the past 60 years.

The bulk of the deal consists of reducing tariffs on more than 800 products.

All in all, the deal is expected to result in a $100 billion increase in two-way trade over the Taiwan Strait.

Although closer relations between Taiwan and China may make some politicians in Beijing and Taipei nervous, the trade deal is expected to be welcomed by businesses and subsequently by markets.

Investors can bet on the success of the new economic deal by using a China ETF such as iShares FTSE/Xinhua China 25 Index ( FXI) or Claymore/AlphaShares China Small Cap ( HAO). However, I think EWT would be a more direct play on the impact of the trade deal than HAO or FXI because its smaller economy will mean that the boost in trade will be more noticeable. With 120 holdings, EWT's largest two holdings command more than 20% of net assets in the fund. The first company, Taiwan Semiconductor Manufacturing ( TSM), specializes in making semiconductor equipment for a variety of electronic devices.

Because TSM accounts for 13.8% allocation of net assets, EWT will be affected by long and mid-term trends in shares of this holding. Recently though, this could prove to be a good thing as there has been a steady flow of positive news from the semiconductor sector as 2010 has progressed.

In a broader sense, EWT will generally receive direction from information technology companies since these represent a 60.9% section of the fund's sectoral allocation. The next largest sector in the ETF is financials, which account for only 14.4% of the fund's exposure.

The fund's second largest holding is Hon Hai Precision Industry. Foxconn, the company that was in the news recently for giving wage increases at electronic device manufacturing plants in China after a spate of worker suicides, is an important division of Hon Hai.

The company has large interests in China in terms of its production facilities and the company exemplifies the importance of cross-Taiwan strait relations in the business world, since many other Taiwanese companies also have factories in China where labor is cheaper.

The new trade deal, which will cut tariffs on the trade of products across the Taiwan Strait, should help to improve the flow of goods for this sort of company.

Furthermore, reduced tariffs will make it easier for Taiwanese companies to profit without relying on keeping wages at their current low levels.

This could have the effect of giving more room for wage increases at the many Taiwanese-owned facilities in China and in turn boost domestic consumption in China as workers will have more disposable income.

Overall, the agreement is timely as it will act as a sort of permanent stimulus package that will help to ensure that both the Taiwanese and Chinese economies continue to emerge with strength from the recession.

Improved trade between the two parties or even just the prospect of better business will not go unnoticed by markets and investors who are optimistic on the agreement can best bet on it with ETFs by using EWT.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion Money Management does not own any of the equities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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