IndexIQ, a developer of index-based alternative investment solutions, is launching the IQ Taiwan Small Cap ETF focused on the domestic market of Taiwan.
The ETF is designed to provide additional Alpha exposure as a satellite holding built around an investor’s core equity portfolio and seeks to track, before fees and expenses, the performance of the IQ Taiwan Small Cap Index.
The market capitalisation-weighted index is intended to give investors a means of tracking the overall performance of the small capitalisation sector of publicly traded companies domiciled and primarily listed on an exchange in Taiwan. One of the four "Asian Tigers", the country is home to the so-called "Taiwan Miracle", a reference to its rapid economic and industrial development over the past several decades.
"In our view, domestically-oriented small capitalization companies provide one of the best vehicles for investors seeking to build exposure to the internal dynamics of an emerging market economy," says Adam Patti, chief executive officer at IndexIQ. "Taiwan has been growing rapidly for many years, and is well-positioned to continue to expand."
Driven by strong exports and access to the mainland Chinese market, Taiwan is home to one of the fastest-growing economies in Asia. Exports grew more than 75 per cent in January 2010, the biggest jump in more than 33 years. Corporate earnings are expected to grow by as much as 80 per cent this year.
Electronics remains a key industry for Taiwan, which is home to some of the world’s most important technology manufacturing operations. More recently, the country has started to turn its attention to renewable energy, an initiative that is expected to further benefit the small capitalisation sector of the stock market. Taiwan plans to invest as much as USD20bn over the next five years into advanced technologies in related energy industries including wind power, LED electric vehicles, solar energy, hydrogen energy and fuel cells.
The ETF is designed to provide exposure to the small cap companies believed to be best positioned to take advantage of the economic developments driving the country’s growth.
To be included in the index, companies must have a minimum average market capitalization of USD150m for the prior 90-day period; the average maximum capitalisation must be equal to the bottom 15 per cent ranking of companies in Taiwan. Stocks are required to have a minimum average daily trading volume of at least USD1m for the prior 90 days, and a minimum monthly volume of 250,000 shares for the prior six months. The index’s components and their respective weights are rebalanced quarterly.