Taiwan ETF's Apple Dichotomy

In recent weeks, anyone that has turned on CNBC, picked up a mainstream financial periodical or visited a trading or investing blog knows that Apple

has been taken to the woodshed. Shares of the iPad and iPhone maker have tumbled more than 22 percent in the past three months. Theoretically, Apple's woes should spell bad news for the so-called Apple derivative plays. Those being the shares of companies that provide chips, circuits and other components to Apple's wildly popular personal devices. In reality, that has not been the case for one Apple derivative play and bullishness in that name is helping boost the fortunes of at least one emerging markets ETF. In the past 90 days while Apple has tumbled by 22.35 percent to be precise, the iShares MSCI Taiwan Index Fund

has added nearly three percent. Sure, EWT has gotten a boost from suddenly resurgent China ETFs. Taiwan's proximity to the world's second-largest economy has made EWT a China play. However, the ETF is also an Apple play due to its arguably excessive weight to Taiwan Semiconductor

, operator of the world's largest chip foundry. Taiwan Semiconductor represents 20 percent of TSM's weight and despite Apple's recent share price erosion, it appears Taiwan Semiconductor's status as an Apple play has boosted EWT's fortunes. In October, it was reported that Apple planned to make Taiwan Semiconductor exclusive supplier of 20 nanometer design rule, quad-core processors for the next generation of iPads, iTVs and

. Taiwan Semiconductor counts numerous tech titans among its clients, but some chip makers are reportedly concerned that demand from Apple will crowd them out of Taiwan Semiconductor's best facilities. News of Taiwan Semiconductor's more intimate relationship with California-based Apple has certainly boosted EWT in the past month. In that time, the $2.68 billion ETF is up almost 8.7 percent, having outpaced Taiwan Semiconductor by nearly 250 basis points. Over the same time, shares of Apple are off 2.3 percent. EWT is not without its risks. Many emerging markets ETFs are heavily allocated to bank stocks, but EWT commits the same offense with technology. The sector accounts for over 55 percent of the fund's weight. Not only that, but EWT

. That may be because of the fund's heavy tech exposure, but there is no getting around the fact that an ETF with a price-to-earnings ratio of 21 and a price-to-book ratio of 2.45, is richly valued, at least on the basis of P/E, compared to the iShares MSCI Emerging Markets Index Fund

. EEM's

. Still, Taiwan Semiconductor has surged at a time when Apple has languished. With that stock accounting for over 20 percent of EWT's weight, it is fair to expect that as long those shares perform well, so will EWT. Noteworthy is the fact that EWT's Apple exposure does not end with Taiwan Semiconductor. The ETF's second-largest holding, Hon Hai Precision Industry, is an Apple supplier as well. That stock

. In other words, more than 28 percent of EWT's can be considered Apple derivative plays. For more on Taiwan, click

.