Taiwan is one of the most successful economies on the Asian continent. It is also the world’s leading superpower in terms of electronic chips. In this article, we analyze the 3 most important stock market indices in Taiwan.
Very close to mainland China, Taiwan is one of the most dynamic and successful economies in the world. Despite being a relatively small country within the Asian continent, it has a population of about 24 million people.
Taiwan´s GDP per capita is at very similar levels to that of other economic powerhouses. In fact, in 2022, Taiwan surpassed Japan in GDP per capita for the first time in history. And its growth trend is very positive.
On top of that, Taiwan is a leading force when it comes to electronic chips. Taiwan Semiconductor, also known as TSMC, is the country’s largest corporation. And many other Taiwanese companies have reached a considerable size, making the capitalization of the country´s stock market very significant.
The Taiwan Stock Exchange is located in the country’s capital, Taipei, one of Asia’s most impressive cities.
When investing in Taiwan, the geopolitical risk is relatively high. This is because China considers Taiwan an integral part of its territory. Because of that, things could change a lot over the next few decades. For the time being, however, Taiwan and China have a mutually productive relationship, as China is Taiwan’s main trading partner.
For those interested in investing in Taiwan without having to pick individual companies, or simply for those who want to analyze its stock market, in the next few sections, we analyze its most important stock market indices.
The TAIEX is the main stock market index of the Taiwan Stock Exchange. This index is composed of all companies listed in the country, so it is indicative of the market value of the Taiwanese corporate sector.
Within the index, stocks are weighted based on their market capitalization adjusted for free float. Hence, those shares in the hands of insiders, such as founders or strategic investors, are not taken into account.
The TAIEX has been in existence since the decade of the 1960s, making it one of Asia´s oldest stock indexes. Although the official index is published in the local currency, the Taiwanese dollar (TWD), we can also find versions of the index in other currencies, such as US dollars and euros.
For those looking for more information about the TAIEX, here is the link to the official website of the Taiwan Stock Exchange.
FTSE TWSE Taiwan 50
The FTSE TWSE Taiwan 50 is an index calculated by the Taiwan Stock Exchange and the company FTSE Russell, which is a subsidiary of the London Stock Exchange.
As its name suggests, this index is composed of the 50 largest companies in the country. Thanks to that, it is a good option for passive investment vehicles looking to track a Taiwanese stock index.
Its stocks are also weighted based on their free float-adjusted market capitalization. And the index is updated on a regular basis several times a year.
More information can be found on the FTSE Russell website.
Finally, those who want to invest in Taiwan through an ETF also have the option to look for one that tracks the MSCI Taiwan index.
This index is published by MSCI, a company that calculates stock market indices. The MSCI Taiwan is composed of all Taiwanese stocks that are part of the global MSCI Emerging Markets index.
There are several reasons why Taiwan is still classified as an emerging country within the MSCI indices. And it should be noted that this is not due to the level of development of its economy, which is more prosperous and advanced than that of many Western countries.
Taiwan’s financial markets are not as open as those of most developed countries. At the same time, global stock index providers are often reluctant to move countries from one category to another. This is because of the market impact such changes have, due to the massive amounts of capital that are invested in passive investment vehicles.
There are other very advanced economies that continue to be part of the emerging markets within these stock market indices, including South Korea, Qatar and Saudi Arabia.
An important fact is that Taiwanese companies account for about one sixth of the entire capitalization of the MSCI Emerging Markets. In fact, together with China and South Korea, these three countries represent half of the market capitalization in the emerging markets space.
More details about the MSCI Taiwan can be found on the MSCI website.
I hope you found this information about Taiwan stock market indices useful. If you want to learn about Chinese stock indices, check out the following link:
Top 10 Stock Market Indices in China
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