Investors are increasingly flocking to Taiwanese exchange-traded funds (ETFs), with younger investors leading the charge, encouraged by online influencers. Additionally, local investors are drawn to the higher dividends offered by ETFs, leading to a surge in total ETF assets from NT$146bn ($4.8bn) in February 2018 to a record high of NT$945bn as of February 2023.
ETFs now account for 39.8% of all onshore domestic public funds’ assets under management in Taiwan. A survey by the Taiwanese think-tank, the Chung-Hua Institution for Economic Research, found that nearly 50% of young people aged 25 to 34 invested in ETFs in 2022, up from around 10% in 2018-2020, making them the age group with the most interest in ETF investing.
The increase in ETF investing by younger investors in Taiwan is partially attributed to the rise of online financial influencers recommending these investment vehicles for long-term investing. Fund manager Peter Hong stated that influencers are now independently providing investment advice on digital platforms, promoting ETFs as a way to accumulate wealth gradually without having to monitor the stock market daily. Taiwanese investors appreciate the concept of long-term investment over making fast money.
ETFs in Taiwan’s Investment Market
Additionally, the management fees of ETFs are lower than those of active funds, and it is easier to track and predict investment outcomes for ETFs, according to Donna Chen, the founder and president of Keystone Intelligence. Many ETFs, including bond ETFs, distribute dividends, and fund companies are promoting them as a saving plan for regular investment with higher dividends, which appeals to retail investors.
Liu Tsung Sheng, chair of Yuanta Funds, believes that the Taiwan ETF market has passed a tipping point due to growing investor awareness and acceptance of ETFs, particularly among younger investors. The equities ETFs recorded a significant growth of 60.4% and reached NT$297.5bn in assets by the end of 2022, while the assets under Taiwan mutual funds dropped by 18.2% last year. Currently, 6 million Taiwanese investors are investing in ETFs.
