ETF XRAY

Semiconductor Recovery Helps Taiwan ETF (EWT)

By Carl Delfeld of the Chartwell ETF Advisor

A winding down of semiconductor inventories has brightened the outlook for semiconductor stocks like Intel as well as the Taiwan exchange-traded fund (EWT) which has about 50% exposure to the semiconductor industry.

The political situation in Taiwan has improved recently in terms of potential opportunities to open more economic ties with mainland China due to the election of Ma Ying-jeou, the candidate of Taiwan’s KMT party. Mr. Ma takes office in early May.

There are already signs of thawing between Taiwan and China. They recently reached an agreement with Beijing that would allow its banks to take stakes in their Chinese counterparts through overseas subsidiaries.

The move will throw a lifeline to Taiwan’s overcrowded, underperforming banking sector by giving it access to China’s huge pool of corporate lending business, until now dominated by multinational banks.

Taiwanese companies are already the largest source of foreign direct investment in China and probably more than 1 million Taiwanese live and work on the mainland.

Now with the semiconductor industry gaining momentum the question is whether EWT has already made its move or has more upside. According to S&P data, the Taiwan market is trading at a bit more than 2 times book, 7.5 times cash flow and 17 times forward earnings.

Is it too late to jump on the Taiwan bandwagon? Join Chartwell ETF and see if Taiwan is in the Asian Opportunity ETF portfolio.

For those of you looking for a more direct ETF play on the semiconductor industry, Tom Lydon of ETF Trends offers the following options.

iShares S&P GSTI Semiconductor Index (IGW), down 12.8% year-to-date
PowerShares Dyname Semiconductors Portfolio (PSI), down 8.6% year-to-date
SPDR S&P Semiconductor (XSD), down 11.4% year-to-date
Merrill Lynch Semiconductor HOLDRs (SMH), down 8.2% year-to-date

ChartwellETF.com Delfeld's Taiwan Pick Up 23% in Last Month

Chartwell ETF Carl Delfeld's top pick at the World Money Show, the Taiwan exchange-traded fund (EWT), is up 23% during the last month. The local currency also took a jump to 30.255 to the US dollar, its highest level in more than a decade.

MoneyShow.com highlighted that Delfeld on February 20th

"added Taiwan to Asian and international portfolios based on changes in leadership, an anticipated [opposition electoral] victory in March, and increase in trade ties with mainland China. The semiconductor industry pullback countered these positive trends, but the neglected iShares MSCI Taiwan Index ETF (NYSEArca: EWT) is now priced at historically attractive valuations. (It closed Tuesday below $14.50, about 20% off its 52-week high—Editor.)

Ma Ying-jeou, the candidate of Taiwan’s opposition Kuomintang (KMT), received a strong boost for his presidential bid after his party won parliamentary elections by a landslide. (Ma is now president-elect)

Delfeld noted a month ago that KMT’s victory will lead to less tension with China will recede and the island’s next president, to be elected in March, could move to greatly deregulate cross-strait economic ties. "

What will be the next country ETF to make its move? Join Chartwell ETF to find out.

Taiwan Banks and ETF (EWT) Benefit Regulatory Changes with China

By Carl Delfeld of the Chartwell ETF Advisor

Taiwanese banks and the Taiwan exchange-traded fund (EWT) should benefit from news that the government had reached an agreement with Beijing that would allow its banks to take stakes in their Chinese counterparts through overseas subsidiaries.

According to the Financial Times Kathrin Hille in Taipei, the move will throw a lifeline to Taiwan’s overcrowded, underperforming banking sector by giving it access to China’s huge pool of corporate lending business, until now dominated by multinational banks.

Taiwanese companies are already the largest source of foreign direct investment in China and probably more than 1 million Taiwanese live and work on the mainland.

The decision to relax the ban on banking investments on the mainland follows more than six months of indirect, informal negotiations with China’s banking regulator which resulted in an agreement on joint supervision of the lenders through third-country regulators.

In ten days Taiwan's presidential election will take place and Frank Hsieh, the ruling Democratic Progressive Party candidate, is forecast to lose mainly because of his party’s failure to revitalise the economy and deregulate economic ties with China. Today's announcement comes on the heels of the government's moves to relax a ceiling on foreign direct investment into China and proposals to cut corporate and individual income taxes. In the end it may be a story of too little, too late.

Is Taiwan now the best China play out there? Join Chartwell ETF and find out today.

Taiwan ETF (EWT) is China Power Play

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

Global ETF investors looking for an indirect way to tap China economic growth should consider the Taiwan (EWT) exchange-traded fund.

The first aspect of the Taiwan ETF basket that investors need to be aware of is the large exposure to the semiconductor industry - close to 50%. But keep in mind that the vast majority of semiconductor manufacturing takes place in China. In fact, close to 20% of China's total exports come from Taiwanese firms. 75% of Taiwan's foreign investment also heads to China. More than 1 million Taiwanese actually live and work in China and 75,000 Taiwanese companies have invested there as well.

How is this for a China play?

How will Taiwan's upcoming presidential election affect the Taiwan ETF? Go to Chartwell ETF and find out. Is it a matter of tails you win, heads you win?

The Taiwan market is currently trading about 19 times projected earnings but its 2008 GDP projected growth rate is 4%. (EWT) is down 5.1% so far this year and was up yesterday 1.9% in morning trading while the iShares FTSE/Xinhua China 25 Index (FXI) is down 14.5% for the year.

The slumping semiconducter industry may turn up soon, but when? Should Taiwan be part of your China strategy? Go to Chartwell ETF for some answers.

Taiwan Exchange Launches New ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Taiwan is moving ahead with plans to list more exchange-traded funds and have a more international exchange. The Taiwan Stock Exchange plans to list more than a dozen exchange-traded funds (ETFs) from the US, Japan, Korea, Singapore and France during the next six months.

The move marks a leap forward in the internationalisation of the island's capital markets according to Kathrin Hille of the Financial Times.

For example, the exchange should soon list with the cooperation of MSCI, the global index manager, to list its iShares ETF (EWT), which is listed on the New York Stock Exchange, in the local currency in Taiwan this month.

Taiwan is no newcomer to the ETF business. It listed its first ETF in 2004, and now has six such funds, whose total assets under management rank seventh in global securities markets.

Capital outflows from Taiwan have risen as investors are now able to more freely invest in global opportunities following pension reform and deregulation of the asset management market during the past few years.

The Taipei bourse is also negotiating with its Tokyo counterpart regarding mutual listings of each other's ETFs, and will this month discuss mutual listings of ETFs with the Abu Dhabi Securities Market. The presidential election in March will also likely spur a policy of more openess regarding economic ties with mainland China which might foster even the lsiting of Chinese companies on the Taiwan market.

Find out how Taiwan fits into your China investment strategy by joining Chartwell ETF.

Taiwan ETF Neat China Play

By Tom Lydon of ETF Trends

Taiwan's exchange traded fund (ETF) iShares MSCI Taiwan Index (EWT) received some news that could give it a bump up. Recent statistics show that Taiwan's overall growth rate this year will be higher than anticipated earlier, despite the global economic downturn triggered by the U.S. subprime credit loan crisis.

The statistics released in late August show that the growth rate during the second quarter this year reached 5.1%, which is 0.7% higher than predicted. It's the best growth performance in the past six quarters, the Taiwan Journal reports.

Some experts think the growth rate could go up even higher. Officials noted the growth in domestic, private investments as well as foreign trade during the second quarter this year, with increased confidence in the high-tech manufacturing sector. The confidence is supported by the fact that during the second quarter, total investment from the private sector reached $17 billion, which is up by 12.5% compared with the same period last year.

Other factors helping the economy include a rising employment rate, personal income is improving and the stock and real-estate markets are gaining confidence. Most Taiwanese economists believe that these increases have indicated that Taiwan's economy is headed for steady growth and stocks could be pushed upward. If the stocks go up, that will benefit EWT, which is already up 17.3% year-to-date.

Find out how Taiwan might fit into your global ETF portfolio and China strategy at the Chartwell ETF Advisor.

Taiwan ETF (EWT): The Ultimate China Play

As China markets continue to defy conventional wisdom, don't forget the Taiwan (EWT) exchange-traded fund. Politics not economics is usually the first concern for most investors considering investing in Taiwan. For the next couple of years, both lead to a window of opportunity for investors with nerve and foresight.

There is little doubt that for the leadership of the Chinese Communist Party, Taiwan is a bone in their throat – a constant irritant – and most likely an obsession for some hard-line factions determined to bring Taiwan back into the fold of the motherland. So sensitive is the issue that an uproar ensued when Google deleted the words “Taiwan, a province of the People’s Republic of China” during a recent routine update of its online map of Taiwan

Even so, any noise that Beijing will take near term military action against Taiwan is likely a bluff for five reasons.

First, any military conflict with Taiwan would surely cancel the Beijing’s showcase August 2008 Olympics. This would be a devastating setback for China’s leadership and people

Second, Beijing’s approach of working quietly to support more friendly political factions within Taiwan seems to be working. Taiwanese President Chen Shui-bian’s term will end in 2008 and Beijing is betting on a less strident and independent successor. Just this week, Frank Hsieh , the presidential candidate of Taiwan's ruling Democratic Progressive party was in Washington to mend fences and make clear that independence for Taiwan is not part of his platform but rather a "final goal". Opposition candidates are much cozier with leaders in Beijing.

Third, although China is rapidly modernizing its military forces, U.S. treaty obligations to Taiwan in the event of an invasion cannot be discounted. In addition, President Chen, citing China’s expanded missile program in his annual New Year’s Day address, called for the legislature to approve plans to purchase more weapons from the U.S. to offset the buildup.

Fourth, a 2005 joint statement by the Japanese and U.S. governments that both countries had a “common strategic objective” to “encourage the peaceful resolution of issues concerning the Taiwan Strait through dialogue,” raises the possibility of Japanese intervention making the military option even more risky and improbable.

Lastly, the economic integration of Taiwan into China is moving ahead at a breathtaking rate. Cross-Straits trade has doubled since 2000 to reach $62 billion in 2004, about 1 million Taiwanese have re-located to work in China, and Taiwanese companies now account for about 65% of hardware output from the mainland.

My view is that while calls for independence have at least temporarily been muted, the desire for a high degree of autonomy from China is still strong. There may be one China but there are three systems – China, Hong Kong and Taiwan. Perhaps the best solution is for China and Taiwan to formally agree to a long period of Taiwanese autonomy to see if China’s system evolves into a more open, transparent system with rule of law and democratic institutions.

Taiwan with a population of 23 million and an area of 14,000 square miles (half the size of Ireland) is a remarkable success story. However, but Taiwanese companies will need to constantly innovate, make Taiwan a major R&D center and build strong consumer brands to avoid the it’s economy from being swallowed by the mainland.

By Carl Delfeld of the Chartwell ETF Advisor

Southeast Asian ETFs Manufacturing Power

Asian ETFs such as the South Korean ETF (EWY), Singapore ETF (EWS), Indonesian ETF (IF), Malaysian ETF (EWM), Taiwan ETF (EWT), India ETF (IIF) and the Philippines are all benefiting from a surprising trend in global manufacturing.

In eight months Intel has committed as much money to Vietnam as it had to China during the previous ten years. In Malaysia, Flextronics has ramped up the production lines of a new M$400m ($110m) factory to make computer printers for another American firm, Hewlett-Packard and in Indonesia, Yue Yuen, a Hong Kong-based shoemaker, has been rapidly increasing its footwear for brands like Nike and Adidas.  

All of these developments are highlighted in a current Economist article that describes how South East Asian countries, rather than being hurt by Chinese growth, are being helped by it. Taken together, South Korea, Taiwan, India and the Association of South-East Asian Nations (ASEAN) increased their share of global manufacturing from less than 7% to more than 9% in the decade to 2003. Exports also rose across the board.

Interestingly, only the United States and Canada saw their shares of global output rise—with just over a quarter between them. Most things nowadays might seem to be made in China, but North America remains the true workshop of the world. American manufacturing output leads the world and is twice its nearest competitor,
Japan.  

As the Economist article points out, costs are only part of the equation. Just as important is diversification. Having already moved a big chunk of their production to China, many firms are reluctant to put any more of their eggs in the same basket.

Southeast Asian ETFs Boosted by Rising Output

Asian ETFs such as the South Korean ETF (EWY), Singapore ETF (EWS), Indonesian ETF (IF), Malaysian ETF (EWM), Taiwan ETF (EWT), India ETF (IIF) and the Philippines are all benefiting from a surprising trend in global manufacturing.

In eight months Intel has committed as much money to Vietnam as it had to China during the previous ten years. In Malaysia, Flextronics has ramped up the production lines of a new M$400m ($110m) factory to make computer printers for another American firm, Hewlett-Packard and in Indonesia, Yue Yuen, a Hong Kong-based shoemaker, has been rapidly increasing its footwear for brands like Nike and Adidas.

All of these developments are highlighted in a current Economist article that describes how South East Asian countries, rather than being hurt by Chinese growth, are being helped by it. Taken together, South Korea, Taiwan, India and the Association of South-East Asian Nations (ASEAN) increased their share of global manufacturing from less than 7% to more than 9% in the decade to 2003. Exports also rose across the board.

Interestingly, only the United States and Canada saw their shares of global output rise—with just over a quarter between them. Most things nowadays might seem to be made in China, but North America remains the true workshop of the world. American manufacturing output leads the world and is twice its nearest competitor,
Japan.

As the Economist article points out, costs are only part of the equation. Just as important is diversification. Having already moved a big chunk of their production to China, many firms are reluctant to put any more of their eggs in the same basket.

Chartwell ETF Advisor’s Asian Opportunity ETF portfolio holds many of the ETFs discussed in this post.
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