ETF Plays For Taiwan's GDP Announcement

In all the chatter about emerging markets, particularly those in the Asia Pacific region, the tiny island nation of Taiwan is sometimes overlooked. A precarious political relationship with China may make some investors pensive about Taiwan, but there is plenty of opportunity here.

On Sunday night, Taiwan reported a 9.2% surge in fourth-quarter GDP, easily the best quarter of 2009 for Taiwan, which posted contractions in the first three quarters of last year. The country is forecasting growth of 4.7% for 2010.

There are several ETFs that investors may want to take a look to trade the GDP report with or to play Taiwan for the longer term. Of course we have the iShares MSCI Taiwan Index (NYSE: EWT), the one Taiwan-specific ETF on the market.

EWT trades 13.6 million shares per day and is up 80% in the past year. EWT has $3.37 billion in assets and an expense ratio of 0.82% and could be a short-term vehicle as well as a long-term core portfolio holding.

Another option is the SPDR S&P International Dividend ETF (NYSE: DWX), which devotes about a third of its country weight to Taiwan.

DWX has lagged EWT on a year-to-date basis, losing about 7% compared to a 4% down move for EWT. DWX is also far less liquid, trading less than 45,000 shares a day, but remains an interesting option for investors looking for Taiwan exposure mixed with some other countries combined with the allure of global dividends.

Still another choice for investors attracted to Taiwan is the WisdomTree Emerging Markets Small-Cap ETF (NYSE: DGS), which like DWX, holds about a third of its weight in Taiwan.

DGS doesn't have the volume or assets that EWT has, but of the three choices mentioned here, DGS has the best sector diversification with six sectors accounting for roughly 84% of the ETF's weight. By comparison, hardware alone accounts for nearly 43% of EWT's weight.

One thing is clear and that is Taiwan's exports grow by 15.2% in the fourth quarter with China being the primary destination for the bulk of those goods, so Taiwan is destined to continue to be viewed as a China play.

EWT and DGS are probably the best ways to play this trend.