At a time when the local equity market has faced volatility, investors who have found it hard to pick a stock to invest have been advised by the Taiwan Stock Exchange to take a closer look at exchange traded funds (ETFs) for investments.
The TWSE, which operates the local main board, said that Taiwan has a diversified ETF product portfolio, which includes inverse and leveraged ETFs, to provide investors with more leeway for investments.
The TWSE said investors should make good use of inverse and leveraged ETFs in a volatile market so that they can enjoy good returns.
Inverse ETFs are expected to help investors hedge risks in a market downtrend, while leveraged ETFs are expected to help investors rake in more profits by doubling returns or even more at a time of a market uptrend.
Since 2014, the TWSE has allowed inverse and leveraged ETFs to be listed on the main board, making the local ETF product portfolio more diverse, a move which has given investors more investment options.
The TWSE said that with more and more inverse and leveraged ETFs listed in the market, the particular ETFs have accounted for the majority of the total ETF turnover, indicating that these special ETFs have been well-received in the local market.
In the first 10 months of this year, turnovers of 61 ETFs listed on the main board topped NT$1.4 trillion, according to the TWSE. But the exchange did not provide the details about trading volume of inverse and leveraged ETFs.
During the 10-month period, the asset size of ETFs in Taiwan rose almost 40 percent from the end of 2015 to NT$280 billion (US$8.81 billion), TWSE’s data showed.
Echoing the TWSE, Fubon Asset Management Co. (富邦投信), a unit of Fubon Financial Holding Co. (富邦金控), said that the composite economic indicators index released by the National Development Council could serve as a good barometer to judge whether an inverse ETF or a leveraged ETF will be a good buy.
In addition, Fubon Asset Management said that investors are advised to take into account major political events at home and abroad, movement of stock options in Taiwan, margin trading/short sale in the local market and even the CBOE Volatility Index (VIX Index) in the U.S. market, which measures investor sentiment, before making a decision on how to invest in ETFs in Taiwan.
Source: Focus Taiwan News Channel