Investors with their sights set on the South Korean equity market have been urged by the Taiwan Stock Exchange (TWSE) to buy exchange traded funds (ETFs) that track the Korean market.
The TWSE, which operates the local main board, said that the trading cost of ETFs have been relatively making such financial products suitable for Taiwanese investors interested in Korean equities.
Since Oct. 7, the TWSE and its Seoul counterpart Korea Exchange (KRX) have launched mutual listings of ETFs as part of an effort by the two exchanges to forge closer business ties.
The Yuanta KOSPI 200 ETF issued by Taipei-based Yuanta Securities Investment Trust Co. (元大投信) opened for trading on TWSE, while the Tiger Taiwan TAIEX (H) ETF issued by Mirae Asset Global Investments has been launched on the KRX.
The Yuanta KOSPI 200 ETF tracks the KOSPI 200 Index, which is comprised of 200 large-cap stocks listed on the KRX that account for about 90 percent of the market’s total capitalization and serves as the benchmark index for Korean stocks.
TWSE said that since the equity markets in Taiwan and South Korea complement each other local investors should invest in ETFs that track the Korean market in a bid to expand investors’ portfolios.
In terms of trading costs, investors have to pay only 0.1425 percent in processing fees, compared to the 1-3 percent in fees charged by mutual funds, while the management fees at overseas mutual funds range from 2-3 percent, higher than the roughly 0.5 percent set by ETFs, indicating that low trading costs have made ETFs more affordable and attractive to investors.
Like stock trading, ETF trades are settled within two days after a bid and its counterbid are matched, which means sellers are paid within two days of a deal being struck, making ETFs highly liquid and ensuring ETF investments help investors make good use of their funds, the TWSE said.
At present, Taiwan’s ETFs generally focus on stocks listed in the local market or in China, the TWSE said, and they needs to broaden their product line by including individual stocks or even markets outside Taiwan and China, which is expected to allow local investors to keep up with global market conditions more effectively.
A more diversified product line is also expected to help investors map out more flexible investment strategies to rake in profits, the TWSE said.
The TWSE added that ETFs have been well received by investors in Taiwan but there remains great potential for future growth
Source: Focus Taiwan News Channel