Key Nvidia, Apple Supplier TSMC-Led AI Stock Craze Boosts Taiwan's ETF Market With $50B Surge

The landscape of Taiwan’s investment market is undergoing a significant transformation, with exchange-traded funds (ETFs) at the forefront of a financial revolution. The latest reports indicate a remarkable growth in the sector, propelled by the fervor surrounding artificial intelligence (AI) stocks.

What Happened: Taiwan’s exchange-traded funds (ETFs) market is experiencing a massive boom, with investments in local stock ETFs surpassing $50 billion, a significant leap from the previous year, Bloomberg reported on Tuesday.

Driven by a surge in artificial intelligence (AI) stocks, the frenzy has seen the local benchmark index climb by 30% in the past year. The growth is largely attributed to a 55% gain by Taiwan Semiconductor Manufacturing Co. TSM, a major semiconductor supplier for Apple and NVIDIA.

Retail investors, who make up about 80% of equity fund assets in Taiwan, are increasingly pouring their savings into ETFs. This contrasts with Japan and China, where central banks and government entities are the primary buyers. Bloomberg Intelligence forecasts that by December, one-third of Taiwanese will own ETF shares.

However, the rapid expansion has raised concerns among Taiwanese officials. The central bank governor and the Financial Supervisory Commission (FSC) have warned about the risks and potential misleading marketing practices surrounding ETF investments.

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Securities firms in Taiwan are pushing for the creation of actively managed ETFs, aiming to diversify offerings in the market. Meanwhile, the largest ETF launch by Yuanta Funds raised NT$175 billion in just five days, although its share price has since dipped slightly below the initial offering.

The ETF boom has been fueled by years of strong exports and low-interest rates, leaving investors with excess cash and a desire for higher yields. Social media influencers have become a key marketing channel for financial firms, with some creators amassing large followings by focusing on ETF content.

Yet, experts like Fitch Ratings’ Rowena Chang caution that the concentration on high-dividend and tech stocks could lead to increased market volatility and inflated valuations. Despite the concerns, industry leaders like Yuanta’s Julian Liu remain optimistic about the market’s long-term prospects.

Why It Matters: The explosion of interest in AI stocks within Taiwan’s ETF market is part of a broader trend observed across the globe. AI-themed ETFs, such as those including NVIDIA, have seen a rise to $6.88 billion. This surge is attributed to investors’ growing interest in the potential of AI technology.

Moreover, Taiwan’s position as a powerhouse in the tech industry, particularly in AI and semiconductor sectors, reported on the soaring Taiwanese stocks due to rising AI and semiconductor demand. This demand has been a catalyst for the country’s stock market growth, with companies like Taiwan Semiconductor Manufacturing Co. leading the charge.

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