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Time to Talk Taiwanese ETFs

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Taiwanese equities were among the key contributors in what was a solid third quarter for emerging markets, indicating the Franklin FTSE Taiwan ETF (NYSEArca: FLTW) is an exchange tactical investors may want to consider over the near-term.

Nearly three years old, FLTW tracks the FTSE Taiwan Capped Index. Taiwan’s manufacturing sector, notably its tech firms, has been enjoying higher orders from people around the world as more purchase new devices in a work or study at home environment.

“The Taiwan equity market helped drive a strong third quarter for emerging markets, according to new research from global index provider FTSE Russell. And recent trading activity in futures contracts related to the FTSE RIC Capped Taiwan Index further illustrate growing investor interest in this important emerging market,” according to FTSE Russell.

FLTW: Isolating the Performing Emerging Markets?

Broadly speaking, emerging markets equities are flailing again this year as the MSCI Emerging Markets Index is lower by two-thirds of a percent. However, there remain pockets of opportunities in developing economies. Taiwan is one such opportunity due to the tech-heavy nature and transparency of its economy.

Morgan Stanley strategists are looking at developing economies “noting that polls showing a wider lead for Democrats could mean less risk of a drawn-out contesting of results that should help emerging market assets perform well in the near-term. Another U.S. fiscal stimulus package would also help emerging market stocks and bonds, the strategists write,” reports Reshma Kapadia for Barron’s.

Data confirm Taiwanese equities are sturdy and have been for some time.

“Taiwan equities rose 10.4% in the third quarter on a US Dollar basis, behind India (+15%) and China (+12.7%) as key regional drivers according to the FTSE RIC Capped Index Series, which offer targeted exposure to various global equity markets. And, notably, the Taiwan market has risen 8.4% in 2020 and 25.7% in the last year as of September 30,” notes FTSE Russell.

Single-country exposures, particularly less volatile ones such as Taiwan, can be practical for investors at a time when broader emerging markets strategies are delivering mediocre returns.

“Recent emerging equity market performance helps illustrate that, in a volatile year for global equities and amid major global issues like COVID-19, it is important for investors to take a global view to asset allocation and portfolio diversification,” said FTSE Russell managing director Jessie Pak. “Seeking regional and single country exposure through investment strategies based on market indexes can be an efficient way to do this.”

For more alternative investing ideas, visit our Alternatives Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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