To Start 2024, Taiwan Is the World’s Hottest Stock Market — Here’s What To Know - The Average Joe


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    To Start 2024, Taiwan Is the World’s Hottest Stock Market — Here’s What To Know

    Noah Weidner

    April 10, 2024

    The Magnificent 7 holds a significant chunk of the US stock market, making up nearly one-third of the S&P 500. But in Taiwan, it’s just Taiwan Semiconductor ($TSM) that comprises 30% of the country’s stock market. The world’s largest manufacturer, supplying tech giants like Nvidia ($NVDA) and Apple ($AAPL), has rallied over 40% this year and recently reported its fastest monthly revenue growth since 2022. And it’s soon to pocket $6.6B in federal grants to build a third plant in Phoenix.

    An AI market: Despite its outsized global impact, Taiwan’s most valuable stock is hardly the only contributor to Asia’s fastest-growing stock market — hosting an estimated 92% of the world’s advanced chip production. Semiconductor giants like TSMC, MediaTek, and ASE Technology, accounting for 65% of Taiwan’s market, have propelled the Taiex index by 16% year-to-date.

    • Retail investors own ~80% of assets invested in Taiwan equity funds — and have expanded their ETF holdings by 80% year-over-year to USD$50B.
    • While many are chasing the AI boom, the country’s smallest sectors — healthcare, materials, and real estate — have also posted double-digit gains to start 2024 and could continue to grow.

    My Arrakis, my Dune

    Taiwan’s economy is rising, with GDP expected to clear 3.4% this year. Earnings are forecasted to increase by two digits, and exports are up 19% thanks to AI demand. However, Taiwan stocks are trading at a premium as the country fetches one of the global markets’ higher valuations (20.7x price-to-earnings). But you can’t talk about Taiwan’s boom without addressing the elephant in the room.

    • Despite Taiwan’s self-governance, neighboring China considers it to be a territory — threatening to take the island by force as part of the Chinese reunification.
    • Given Taiwan’s unprecedented importance to the AI boom, such a move would be detrimental, with analysts at Bloomberg estimating a war over Taiwan could cost $10T.

    How can I invest in Taiwan? If the threat of invasion or the high concentration of tech stocks doesn’t make your pockets nervous, one way to gain exposure to the Taiwan boom is through an ETF. The Franklin FTSE Taiwan ETF ($FLTW), which offers investors 123 Taiwanese stocks at a 0.19% expense ratio, is the cheapest and best-performing fund tracking the market. But keep your eyes peeled — as geopolitical risks go, Taiwan is among the biggest.

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