Taiwan stock ETFs lead inflows in Asia with US$19 billion haul

[TAIPEI] Traders are swarming to equity-focused, exchange-traded funds (ETFs) listed in Taiwan, with demand from retail investors and a strong local currency driving up flows.

Taiwan-listed equity ETFs have attracted more than US$19 billion in inflows this year, the most among their regional peers, according to data compiled by Bloomberg Intelligence. That’s more than the inflows into products listed in South Korea and China combined, and nearly the amount these Taiwanese ETFs brought in for all of 2024.

The big inflows highlight the increasing power of Taiwan’s retail investors. While the island’s shares have seen foreign outflows of US$3 billion this year, the fourth most in Asia, the benchmark Taiex Index is only down about 2 per cent, according to Bloomberg data. A rally in the Taiwan dollar is also supporting investments in local currency, with a “Sell America” rotation fuelling expectations for further gains.

“Inflows into Taiwan stock ETFs usually increase when the market pulls back, as local investors prefer buying on dips,” said Eddie Cheng, chief investment officer of Cathay Securities Investment Trust. They have also grown “as investors shift away from US dollar assets and turn to Taiwan stocks”.

Taiwan’s biggest equity ETF has garnered US$6.2 billion in inflows, the most in the region for 2025. The surge followed a fee reduction and share split that could lower prices for retail investors. Its almost 60 per cent weighting in Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, also helped lure investors.

“Taiwanese people’s overall confidence in Taiex and the chip industry is still fairly strong,” spurring traders’ interest in local ETFs, said Julian Liu, chairman of Yuanta Securities Investment Trust.

About two million local investors participate in investment plans that make contributions in regularly fixed amounts, which can bring around NT$15 billion (S$659 million) of inflows into Taiex ETFs every month, Liu added.

Total assets in Taiwan’s broader ETF market surged 64 per cent to NT$6.4 trillion last year and now rank third in the region, according to industry data and Bloomberg Intelligence. Equity and fixed-income products make up most of those ETFs.

The strong inflows are likely to continue. Taiwan’s developed retail market and sophisticated investors could help local ETFs grow much quicker than the rest of the region, according to Bloomberg Intelligence senior analyst Rebecca Sin.

Regulators are implementing measures to supercharge the fast-growing sector. Officials recently greenlit cross-listed ETFs between Taiwan and Japan, which allow products to list in both locations.

At the same time, foreign investors have been repeatedly buying the island’s ETFs to speculate on the local dollar. The central bank is seeking feedback on a plan to tighten currency purchases by overseas stock investors.

Still, most demand comes from retail investors, who buy ETFs as a long-term investment.

“Taiwanese people have a lot of money that needs to be invested,” said Xie Ming-zhi, fund manager of Capital Investment Trust. “People want to have products that help generate passive income when they retire.” BLOOMBERG