The era of innovative thematic ETFs leads Taiwan onshore fund market getting to summit
Despite all countries are struggling with COVID virus, vaccine penetration helps lifestyles back to normal and translated into an extraordinary reacceleration of the economy. 2021 succeeds 2020 with sharp economic recovery though the shock of the new virus variants increases market’s worries. It takes time for the whole market to digest the issues including continuous pandemic, shortage of global supply chain, and the rising rates against the inflation. In general, Taiwan has structural advantages thus enjoyed outperformance than other emerging market peers. Taiwan asset management market has organic growth in 2021. Notably market growth momentum drives investors’ appetite toward growth stocks, i.e. technology, ESG, high dividend and domestic equity themes. Innovative themes i.e. electrical vehicle and Vietnam, also obtained much interests.
After Chinese New Year of Tiger, let’s have a look of overall new launched onshore funds in 2021 in Taiwan. Out of 39 licensed Securities Investment Trust Enterprises (SITE), 27 SITEs launched 64 onshore funds with more than USD 10 Bn asset inflows from these new funds as of Dec 2021.
Exhibition 1: Types of New onshore funds in 2021
Source: SITCA, consolidated by NIC
Fund type preference rotates. Equity ETF became the new favorite
Compared to that in 2020, number of total new onshore funds decreases slightly, but new funds’ inflows are moderately improved. Active equity and bond funds are losing favors by the market. People turns to embrace ETFs.
Along with global equity momentum, Equity ETF becomes the new lover by Taiwan investors, followed by multi-asset funds. Totally 16 equity ETF funds are launched in 2021, triple than the number in the previous year. And as of Dec 2021, these 16 funds drew more than USD 4.6 Bn, occupying almost half of the total inflow from new funds in the year. Another point worth to mention is that in the top 10 new onshore funds, 6 out of 10 belong to equity ETF. We can even conclude that 2021 is the era of equity ETF. Multi-asset funds also gain more popularity. Both the fund numbers and total inflows from multi-asset category are doubled.
Bond ETF used to be extremely popular back to 2019. The looming situation for this category continues in 2021. There are only 4 bond ETFs launched in the year.
Exhibition 2: Top 10 New onshore funds (as of Dec 2021)
Source: SITCA, consolidated by NIC
The Top 10 New Funds reflect the market’s flavor and trend
Top 10 new funds are occupied by Equity ETF the most. Most of the ETFs have very strong themes to allure their fans. As of Dec 2021, CTBC Hang Seng China High Dividend Yield ETF becomes the largest one with steady inflows over the past 12 months. This ETF invests in China companies which are listed in Hong Kong. It concentrates the sectors i.e. real estates, finance and energy industry. Admit Hang Seng index plunged almost 20% in a single year, the ETF ended the year with flat returns. Relative outperformance and high-dividend characteristics are recognized by its investors. Another success high-dividend thematic ETF is Fubon Taiwan High Dividend 30 ETF, a high conviction ETF investing in 30 selected listed Taiwan companies offering prominent equity dividends and better balance sheet. This Fubon fund is launched in year end. In terms of IPO volume, Fubon high-dividend 30 ETF just falls behind Cathay Global Autonomous Electric Vehicles ETF. Though hit by the market sell-off in 2022 beginning, Fubon high-dividend 30 ETF continues to collect inflows. To combine high-dividend and strong sentiment of Taiwan stock market, we are looking forward to its growth.
Powerful forces are driving ESG in positive loop. ESG thematic funds remain popular in the past two years. With more and more investors aware the importance of environmental sustainability, and corporates with cautiousness, actions on ESG principles, total 14 ESG-focused funds were launched in 2021. When talking about going green, we cannot miss the electronic vehicle related funds. With the rising environmental awareness, and the trend of electronic vehicles, people get interested in the relevant topic, so does the finance products. There are 4 EV related ETF launched in 2021. Cathay Global Autonomous and Electric Vehicles ETF was a notable case. Launched in June, with healthy fund size growth during the months though eventually surpassed by CTBC high-dividend 30 ETF as of Dec 2021.
In general, 2021 Taiwan onshore fund market displayed satisfied development. We see assets of funds closing over the NTD 10 Bn mark organically growing up through the year without any sharp pull-off. In light of positive stock sentiment in 2021, the popular ETFs had continuous inflows, leaving passive strategy top active funds. Unique and appealing topic becomes the key for active funds to knock investors’ door.
Exhibition 3: Top New launched onshore funds (as of Dec 2021)
Source: SITCA, consolidated by NIC
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