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The listing of TOPIX index-based leveraged and inverse ETFs on the Taiwan Stock Exchange Corporation (TWSE) – the first ever ETFs tracking the Japanese market to list in Taiwan – on 10 September 2015 represented a milestone in the ongoing cooperation between the Taiwan and Japan capital markets.
Both ETFs raised a total of NT$1.07 billion after order books closed on 24 August 2015, which is estimated to generate revenues of around NT$90 million in the securities market and boosting the momentum of the Taiwan economy.
Japanese securities are proving to be in demand among Taiwanese investors looking to diversify their asset allocations and market rotations. According to the Taiwan Securities Association, investors have invested around NT$10.9 billion in Japanese securities via Taiwanese sub-brokerage between January and July 2015, of which NT$10.4 billion were equities and NT$500 million were ETFs. The newly listed TOPIX ETFs provide a lower cost and more efficient investment channel for investors wishing to trade the Japanese market. It will also help investors further diversify their investments.
Based on the 240% average monthly turnover of the six other leveraged and inverse ETFs currently trading on TWSE, it is estimated that both TOPIX ETFs could achieve a yearly trading value of NT$30.8 billion in the future, generating NT$30.8 million in securities transaction tax. An additional NT$87.78 million could be generated in brokerage, exchange and clearing fees each year, while ETF issuers could expect to receive NT$10.59 million in management fees each year.
The newly listed ETFs will also bring diverse economic benefits to Taiwan, its finance market and finance industry. It will also keep a large amount of capital and liquidity in the Taiwan market, in line with the government’s ‘Financial Import Substitution Program’.
