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