Abstract
The Taiwan stock market has performed outstandingly in recent years, with a marked improvement in market size and international ranking. The market’s transaction efficiency and transparency have significantly improved since the implementation of the continuous trading system in 2020. Driven by the development of the AI sector, the semiconductor industry has contributed the most market value, accounting for 47.20% The participation of foreign investors continues to rise and the size of the ETF market has also grown rapidly. With an asset size of USD 194.8 billion, the Taiwan stock market has become the third-largest in Asia. Going forward, the Taiwan stock market will focus on technological development, system optimization and ESG promotion. It will also plan to improve ETF products and be committed to building itself into an Asian asset management center, continuously promoting market internationalization and sustainable development.
Significant Advancement in Market Size and International Ranking
The Taiwan stock market has shown steady growth in recent years, with a continuous increase in its market size and international competitiveness. The trading value of Taiwan stocks ranked 19th in the world in 2019 and as of the end of November 2024, the ranking has risen to the 10th. Since the implementation of the continuous trading system in March 2020, the average monthly transaction value reached USD 138.1 billion, an increase of 82% from USD 75.6 billion in the previous year. In 2021, the average monthly transaction value was USD 248.7 billion, an increase again of 80% from that in 2020. During the same period, the total market value of Taiwan’s stock market doubled from USD 1.1 trillion in 2019 (17th in the world) to USD 2.23 trillion in November 2024. Its global ranking rose to 12th, demonstrating the growth momentum of the Taiwan stock market.
A New Market System was Launched and the AI Industry is Gaining Popularity
One of the key factors behind this impressive performance is Taiwan’s implementation of the “intraday continuous trading system” in March 2020, which effectively improved market trading efficiency and information transparency. In addition, the rapid development of global technology trends, especially the explosive growth of artificial intelligence (AI) applications, has become an important driving force for the growth of Taiwan’s stock market. Since OpenAI launched ChatGPT at the end of 2022, both large enterprises and countries have attached importance to generative AI technology and invested in building AI computing centers. Taiwan has always been a hub of the global technology supply chain and a stronghold of semiconductor production. The semiconductor industry has become the largest category in the Taiwan stock market, accounting for 47.20% of the market value.
Foreign Investors’ Participation has Doubled
The environment of continuous trading and AI technology, coupled with the impressive revenue and profit performance of TWSE-listed companies, have attracted a continuous inflow of international funds. The Taiwan stock market has the advantages of high yields and reasonable price to earnings ratio. The average yield was about 3.37% in 2023. The market’s competitive price to earnings ratio compared to those of global markets, enhances its investment attractiveness and can provide stable dividend income. The proportion of foreign investments in Taiwan’s stock market has grown from 3.63% in 2000 to 35.8% in November 2024, a 9.8-fold increase in less than five years. The market value proportion of foreign investors’ shareholdings has also gradually increased from 16.31% in 2000, reaching 44.35% at the end of November 2024. Foreign investors’ participation in stock trading and long-term shareholding shows that foreign investors have confidence in the future development of the Taiwan stock market.
The ETF Market is Booming
Taiwan’s ETF market has shown explosive growth in recent years, with both total assets under management (AUM) and the number of product rapidly expanding. As of the end of November 2024, there were a total of 266 ETFs in the Taiwan stock market, with a total AUM of USD 194.8 billion, ranking it third in Asia. Looking back over the past 10 years, the AUM of Taiwan’s ETFs has grown nearly 36 times and the number of listed ETFs has increased by nearly 10 times, making ETFs an important instrument for investors’ asset allocation. Despite the global stock market decline in 2022, following the U.S. Fed’s interest rate hike and a 9.85% decrease in the AUM of global ETFs, the AUM of Taiwan’s ETFs grew by 11%, highlighting the confidence of investors in ETFs.
This impressive growth was mainly driven by two major trends: the first was investors’ increasing demand for low-cost, high-liquidity investment instruments and the second was investors’ interest in the stock market. The outstanding performance of the Taiwan stock market has also prompted investors to shift their funds from traditional savings and insurance products to the ETF market in pursuit of higher returns, further promoting ETFs as a choice for long-term investment.
Future Prospects of the Taiwan Stock Market
The TWSE has actively conducted investment promotion activities and visited exchanges in Europe, the Americas, Singapore and the Middle East. It will continue to deepen its cooperation with various exchanges in the future.
Looking ahead, the Taiwan stock market will focus on three major aspects for its development; the technology industry as the continuous driving force for the Taiwan stock market, optimization of the Taiwan stock market and a commitment to becoming the center of Asian asset management.
AI is expected to continuously drive the global economy. As an important link in the global technology supply chain, Taiwan will benefit from the continued expansion of the AI and high-tech industries.
Taiwan will continue optimizing its stock market, including enhancing the trading system, expanding financial product diversity and promoting ESG development. Taiwan ranked third in the Asia Corporate Governance Association’s evaluation in 2023 and continues to promote a comprehensive sustainable development ecosystem in accordance with the sustainable development roadmap for companies. The Corporate Governance Evaluation is planned to be upgraded to ESG evaluation in 2026, demonstrating Taiwan’s commitment to continuously improving sustainable corporate development.
Taiwan plans to open its market for “active ETFs” and “multi-asset ETFs” in 2025 to improve its product line, provide investors with more diverse and flexible investment options and meet investment needs under different market environments.
The Taiwanese government is making efforts to build an Asian asset management center with local characteristics and will meet this goal through a six-year three-stage plan; “feeling the changes in two years, seeing the changes in four years and achieving the results in six years.” The TWSE will also support the growth and internationalization of Taiwan’s capital market by assisting issuing companies in their international development, launching diversified products to promote market development, promoting international cooperation and cultivating market professionals together with institutions.