Time to Taiwan? Maybe, Maybe Not

Despite being one of the largest country weights in the iShares MSCI Emerging Markets Index Fund

, the Vanguard MSCI Emerging Markets ETF

and scores of other multi-country ETFs, it sure feels like Taiwan has been flying under the radar as of late. Even as Chinese stocks have

, Taiwanese issues have been stagnant. Over that time, the iShares FTSE China 25 Index Fund

is up five percent while the iShares MSCI Taiwan Index Fund

is up just 1.2 percent. Part of the reason for the lethargy of EWT and the names it tracks is weakness in the technology sector, which accounts for nearly 56 percent of EWT's weight. "In the semiconductor business, for example, inventory levels have surged recently, resulting in lower capacity utilization rates, which are generally associated with less pricing power for companies, and posing near-term headwinds," iShares Global Chief Investment Strategist Russ Koesterich said in a note. "Meanwhile, weak global capital expenditures and sagging consumer demand adds pressure on the personal computer market." Weakness in the semiconductor sub-sector is bad news for EWT because the ETF is home to several chip names. Taiwan Semiconductor

is the fund's largest holding with a weight of over 20 percent. Inflation has also been a problem. "For the past three months, headline inflation measures have been persistently above the 2% inflation target set by the central bank, a result of higher fuel, electricity and food prices,"

in reducing his rating on Taiwan to Neutral from Overweight. Bolstering the bear case for Taiwan is a premium market valuation. EWT has a price-to-earnings ratio of 20.5 and a price-to-book ratio of 2.32. That implies Taiwan is far pricier than China and the broader emerging markets universe

. With the global economy still tepid at best, Taiwan's dependence on exports has been exposed. However, there is another side to the story. The country was recently 16th-best country for business

. The International Monetary Fund is projecting Taiwanese GDP growth of 3.9 percent next year, a stark improvement from the 1.05 percent growth the government expects this year. Investors looking for Taiwan exposure without making a full commitment as required by EWT should consider the falling ETFs.

Based purely on the fact that emerging markets firms are

, the iShares Emerging Markets Dividend Index Fund is alluring. On that note, Taiwan has long been one of the preferred destinations in the developing world for income investors so it is not surprising to see the country dominate DVYE with a weight of over 22 percent. The fund debuted in February and has thus far accumulated almost $49 million in assets under management. DVYE's 30-day SEC yield is 5.11 percent. Income investors seeking Taiwan exposure should also consider the WisdomTree Emerging Markets Equity Income Fund

and the SPDR S&P Emerging Markets Dividend ETF

.

The WisdomTree Emerging Markets SmallCap Dividend Fund's name might imply a level of risk that some investors do not want to take because it combines emerging markets and small-caps. What is important to note, however, is that DGS devotes over a third of its weight to Taiwan and South Korea. Those are two of the least volatile emerging markets and that assertion is borne out in the statistics. For example, the aforementioned iShares MSCI Taiwan Index Fund has been

.