TWSE Market Insights

＜中文版＞

According to ETFGI, a leading global research and advisory firm, in 2024, the global ETFs industry had 814 issuers listed on 81 exchanges in 63 countries, with a total of 11,645 ETFs, and asset value of US$14.70 trillion, a 27.71% increase from US$11.51 trillion in 2023. This is more than five times the asset size of 2.73 trillion dollars a decade ago.

The Taiwanese ETF market is one of the fastest growing ETF markets in the world, with a total of 272 ETFs (174 listed on TWSE and 98 listed on TPEX) in the market in 2024, amounting to NT$6.4 trillion (NT$3.4 trillion on TWSE and NT$3 trillion on TPEX), and the size of the market in FY2024 has grown by 65% as compared to the FY2023, which is 38 times the size of the market of 10 years ago when it was about NT$167.1 billion. This far exceeds the growth rate of global ETFs, and Taiwan’s ETFs are the third largest in Asia. The rapid development of Taiwan’s ETF market has attracted attention worldwide over the years. The rapid development of ETFs in Taiwan may be attributed to several important factors:

I. Taiwan’s ETF Market Has Perfect Ecosystem to Support Its Growth In All Aspects

As Taiwan’s ETF market has undergone more than 20 years of development, it has a complete ETF ecosystem from regulations to infrastructure, including an index compilation by index companies, issuance of ETFs by asset management companies, and brokerage roles and liquidity providers by securities firms.

II. Diversified ETF Products to Meet the Various Investors’ Needs

The ETF products in Taiwan are diversified, covering both domestic and foreign constituent securities. Domestic ETFs cover a wide range of products including capitalization, industry (e.g. semiconductor, financial), different themes (AI, ESG, etc.), and Smart Beta (low volatility, high dividend, etc.); while ETFs for foreign constituents offer a wide range of themes, such as investing in different countries, real estate, technology, bonds, AI, communications, electric vehicles, and biotechnology, which makes it easier for investors to invest in different markets around the world. 

Both domestic and overseas ETFs comprising securities include not only equities, but also bonds, commodities, and foreign exchange rates. Bond ETFs have become popular among investors over the years and have grown significantly in size. By the end of December 2024, equity and fixed-income ETFs on TWSE and TPEX each accounted for approximately 50% of the ETF market. Both categories exceeded NT$3 trillion, while futures ETFs accounted for 0.40%, amounting to about NT$26 billion.

III. Friendly Trading System Attracts Smaller and Younger Investors

To assist investors make long-term investments in the stock market, while enhancing the convenience of small-value investments and diversifying investment risks, so as to achieve the goal of “financial inclusion” in the capital market, the Taiwan Stock Exchange (hereinafter referred to as the “TWSE”) has been promoting the Dollar Cost Averaging(DCA) plan through securities dealers since 2017. In 2020, TWSE launched intraday odd-lot trading and continued to shorten the settlement interval to 5 seconds.

Since the launch of the DCA plan, by December 2024, the accumulated amount of DCA plan investment in equities and ETFs exceeded NT$390 billion. Both the investment amount and the number of investors have shown a steady growth trend. As we look at the ratio of the amount of ETFs and equities for investors under a DCA plan in FY2024, the proportion of ETFs is about 82% and the proportion of equities is about 18%. As for the ratio of the number of investors, the proportion of ETFs is about 76% and the proportion of equities is about 24%. The number of investors of ETFs is much larger than the number of investors of equities, which indicates that investors of DCA plan in Taiwan prefer to invest in ETFs compared to equities.

The age distribution of investors in 2024 shows that the distribution of investors of DCA plan is mainly concentrated in the young and middle-aged group aged between 21 and 50, with the largest number of investors aged between 21 and 30 (27.25%) and 31 to 40 (25.93%), which together account for more than 50% of the total number of investors of DCA plan. When observing the age distribution of individuals participating in odd-lot trading, the proportion of trading accounts under 20 years old and between 21 and 30 years old accounts for about 25.39%, significantly higher than the 20.41% for whole share trading. Furthermore, the age group with the highest proportion of trading accounts (31 to 40 years old) is also younger than the main trading group in the broader market (41 to 50 years old), which clearly demonstrates the system's appeal to younger and smaller investors.

The implementation of intraday odd-lot trading and DCA plan system effectively lowers the threshold for small and young people to enter the ETF market, thereby contributing to the continuous growth of Taiwan’s ETF market.

IV. Implementing Investor Education to Effectively Increase ETF Recognition

TWSE has always been committed to investor education and promotion. TWSE organizes various online and offline seminars and activities, issues press releases and special reports, films online courses, and produces short videos and promotional materials every year to promote ETFs characteristics, risks, and important concepts through a variety of media channels to actively implement investor education.

TWSE also provides various online educational resources, including the ETF section of its official website and the Investor Education Platform. In 2023, TWSE has built a one-stop investment information platform, “ETFortune,” to create a comprehensive and integrated platform for ETF information. The growth in the number of people with proper investment concepts will contribute to the long-term growth and development for Taiwan’s financial market.

V. Other Factors Driving the ETF Development

The development of ETFs is also driven by other factors, including: (1) risk diversification, which reduces individual stock risk and saves investors’ time on research by combining a stock portfolio by a professional fund manager; (2) simplicity and transparency of investment; investors’ confidence is boosted by the fact that constituents can be seen on a daily basis; (3) low-cost structure, which allows for lower management fees and transaction costs compared to traditional mutual funds; and (4) uncertainty of macroeconomic environment, which drives investors’ preference for flexible and stable investment vehicles. These factors make ETFs more attractive due to their liquidity and diversified features.

With the booming ETF market in Taiwan, the Financial Supervisory Commission of Taiwan (hereinafter referred to as the FSC), together with the country’s economic development strategy, is building an “Asian Asset Management Center” with Taiwanese characteristics. In 2024, the FSC proposed five major directions for the development of an asset management center, including people (target clients), money (cash flow), products (investment targets), institutions (asset management providers), and incentives (taxes and policies). Among them, in terms of products, the direction is to relax regulations and open up diversified financial products. After evaluating the development and characteristics of the ETF market in Taiwan and making reference to international market regulations, the FSC, together with TWSE, Taipei Exchange (TPEX), and the Securities Investment Trust and Consulting Association of the R.O.C. (SITCA), have jointly discussed to open up active ETFs and passive multi-asset ETFs.

On December 25, 2024, the FSC announced to amend some relevant regulations, including the amendments to certain provisions of the “Regulations Governing Securities Investment Trust Funds,” certain provisions of the “Regulations Governing Information to be Published in Prospectuses by Securities Investment Trust Enterprises Offering Securities Investment Trust Funds,” and the provision of the “Standards Governing Eligibility of Securities for Margin Purchase and Short Sale” to formally open up the active exchange-traded fund (Active ETF) and to lift the restrictions on passive index equity fund to include both stocks and bonds (Passive Multi-Asset ETF). This will further diversify the Taiwan ETF market to meet the various investor needs and attract the international asset management firms to enter the market.

To comply with the FSC’s policy amendments, TWSE has simultaneously amended the relevant rules and regulations on the issuance aspect, the trading aspect, the monitoring aspect, and the management aspect of the brokerage firms. These include the “Operating Rules of the Taiwan Stock Exchange Corporation,” “Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings,” “Taiwan Stock Exchange Corporation Directions for the Recognition of the Qualifications of Issuers of Exchange-Traded Funds and Underlying Indexes,” “Taiwan Stock Exchange Corporation Rules Governing Trading of Beneficial Certificates,” “Taiwan Stock Exchange Corporation Operation Guidelines Governing Liquidity Providers of Beneficial Certificates,” “Taiwan Stock Exchange Corporation Directions for Announcement or Notice of Attention to Trading Information and Dispositions,” “Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers,” and related attachments, were announced and came into effect on December 31, 2024.

The U.S. market is the most popular market for active ETFs in the world. The world’s first active ETF was listed and traded in the U.S. in 2008. The initial development was relatively slow until 2019. The introduction of the ETF-specific law by the U.S. Securities and Exchange Commission and the lifting the restrictions on active ETFs attracted more issuers to enter the active ETF market, which led to the number of new active ETFs launched in the U.S. In 2020, the number of new active ETFs launched in the U.S. for the first time exceeded that of passive ETFs, and the development of active ETFs also gained increasing prominence. In particular, during the COVID-19 pandemic, a series of ARK’s active ETFs attracted a lot of attention from investors as their investment strategies focused on disruptive and innovative companies, with returns far higher than other passive ETFs during the same period at that time.

At present, more than 1,800 active ETFs are listed in the U.S., and they have grown significantly. In particular, 75% of the newly listed ETFs in the last two years are active ETFs, which makes the U.S. market dominant and has become the key market for the development of active ETFs in the world. Apart from the U.S. and European markets, active ETFs have also been introduced in Korea, Hong Kong and Japan in recent years.

According to ETF GI, the amount of active ETF assets exceeded US$100 billion for the first time in 2018; by the end of 2024, the global active ETF asset value has reached a record high of US$1.17 trillion, a 58.6% increase from US$738.49 billion in 2023, and 36 times the level of a decade ago. For example, the compound annual growth rate over the past ten years has been as high as 40.3%, making it a fast-growing type of ETF in the market.

Also, based on the investment portfolio, active ETFs used to invest in fixed-income products; however, the weighting of equity products has gradually increased recently, showing that there are more equity ETFs than fixed-income ETFs as far as the issuance profile for active ETFs in various countries at present. Although the development of active ETFs in Taiwan is still in its early stage, Taiwan has great advantages and is expected to develop vigorously and become a new driving force in the asset management industry with steady policy support.

Active ETFs are listed and traded on the stock exchange similar to current passive ETFs, but their investment strategies and proactive approaches are somewhat similar to those of active mutual funds. Unlike the passive ETFs, active ETFs allow fund managers to actively create, operate and adjust their investment portfolios based on their investment strategies in order to achieve more diversified investment objectives. For example, they may seek to exceed the benchmark or achieve specific investment objectives, which is very different from the current passive ETFs that replicate the performance of index tracking. Therefore, the fund managers have more flexibility to manage these ETFs. Currently, the following are the highlights of the regulations issued by the financial regulator:

I. Name

the name of active ETFs is “Active Exchange Traded Funds.”

II. Scope

Given that it is the first time to introduce active ETFs in Taiwan, initially, active equity ETFs and active bond ETFs will be available, i.e. an ETF that holds either equities or bonds, and the total amount invested in equities or bonds should reach 70% or more of the fund’s net asset value, and should be invested in accordance with the securities investment trust contract.

III. Information Disclosure

The investment portfolio is disclosed completely. Like the current passive ETFs, the actual investment portfolio is disclosed on the asset management company’s website after the fund’s net asset value has been calculated every business day to protect the investors’ rights and interests. In addition, active ETFs in other countries are fully disclosed in general. Investors should also be aware that the information of the fund’s portfolio will be announced after the net asset value of the fund is calculated every business day. However, given the active ETFs’ features, the fund manager may make portfolio adjustments on the following business day, so that the investment portfolio may not necessarily be the same as the one announced on the previous day.

IV. Benchmarks

There is no mandatory requirement to have a benchmark. However, if a benchmark is adopted, the fund’s investment disclosure should include an explanation of the characteristics of the benchmark, differences between the ETF and the benchmark in terms of investment strategy and features, a comparison of the ETF’s performance with that of the benchmark, as well as definitions and calculation formulas. Additionally, the fund’s net asset value and the cumulative percentage change of the benchmark must be reported monthly on the Market Observation Post System as a reference for investors to assess the performance of actively managed ETFs.

V. Trading Methods

Similar to passive ETFs, the trading methods include general trading, odd-lot trading (during and after trading hours), and under DCA plan; after being listed, it can be used as the underlying of credit trading, borrowing, and hedging transactions.

VI. Identification

In order to facilitate investors to identify and differentiate the characteristics of the product, the TWSE has stipulated in the relevant regulations that the active equity ETFs will have "A" as the sixth code in the ticker, while active bond ETFs will use "D."

VII. Prospectus

In addition to printing the name of the active ETF on the cover of the prospectus, the product feature of the active ETF should be printed conspicuously.

VIII. Applicable Regulations

Active ETFs investing in equities or bonds should be applied to the relevant regulations of equity funds and bond funds respectively. In addition, active ETFs may distribute the gains. In general, the distributable gains of active ETFs and matters like adopting the income equalization for dividend distribution are similar with the current passive ETFs.

Given that it is the first time to introduce active ETFs in Taiwan, the financial regulator has initially started with the active equity ETFs and active bond ETFs, and the investment portfolios have been fully transparent. In the future, depending on the development of the new products issuance and the practical needs of issuers and investors, TWSE will continue to cooperate with the financial regulator in discussing and adjusting the operating procedures or the direction of the active ETFs’ product opening.

Multi-asset ETF was first introduced by BlackRock in 2008, and subsequently listed in Korea, the UK, Australia, Hong Kong and other countries. The U.S. is the world’s largest multi-asset ETF in terms of size and number of products, and is also the most mature market in the world. One of the earliest, best-known and largest multi-asset ETFs is the “A-Series” ETFs (AOA, AOR, AOM, AOK) issued by BlackRock iShares on November 4, 2008, which are passive multi-asset ETFs holding five equity type and two bond type ETFs under the iShares portfolio.

In terms of product design, multi-asset ETFs in various countries contain active multi-asset ETFs and passive multi-asset ETFs. As for the active/passive structure, passive ETFs dominate in most of the countries, which is in line with the present direction of the financial regulator to introduce passive multi-asset ETFs.

Multi-asset ETFs, like the current passive ETFs, are not only listed and traded on the stock exchanges, but also have the same regulations as the current passive ETFs. However, the index-tracking components consist of various assets, so that if investors want to make balanced allocations between stocks and bonds, they may be able to achieve risk diversification by using multi-asset ETFs. Currently, the following are the highlights of the regulations issued by the financial regulator:

I. Scope

The underlying securities of the index must include both equities and bonds, and no leveraged or inverse ETFs can be issued using the aforementioned underlying indexes.

II. Equity to debt ratio

The ratio of equity to debt is fixed based on a conditional basis. The rules for compiling the index should set fixed allocation ratios to equities and bonds, or set out indicative conditions (e.g. market analysis indicators) and the applicable allocation ratios to equities and bonds under each of the indicative conditions. The aforementioned criteria and allocation ratios should be based on examples drawn from overseas passive balanced ETF index compilation rules and should be reasonable.

III. Product Identification

To help investors identify, the last character of the stock code is "T".

IV. Trading Methods

Similar to passive ETFs.

The passive ETF market for index tracking in Taiwan has been growing rapidly over the past few years. Investors are now familiar with ETFs whose index constituents are stocks or bonds. At present, the financial regulator may initially introduce balanced passive ETFs that include both equities and bonds as index constituents. Depending on the actual development situation, TWSE will assist the financial regulator in gradually discussing to introduce other multi-asset ETFs.

Investors are unfamiliar with new products when active ETFs and passive multi-asset ETFs are just being introduced to the public. Therefore, it is necessary to devote more resources to investor education and promotion in order to protect investors’ rights and interests, and to enhance investors’ awareness and acceptance of the new products. While active ETFs may have the potential for higher returns, investors need to carefully evaluate these additional risks to ensure that they can tolerate these risks and that the investment is consistent with their investment objectives.

Under the guidance given by the financial regulator, TWSE, TPEX and SITCA have jointly planned a complete set of active ETFs and passive multi-asset ETFs promotion program and have started investor education on the new products by inviting experts and scholars to conduct a series of special reports, issuing related press releases, organizing seminars, and publishing full-page news to introduce active ETFs and multi-asset ETFs to the investing public in order to help them to understand the new products.

For physical activities, TWSE has started to raise the awareness of the general public and investors about the new products in various activities and courses including several investor seminars, lectures at community universities and campus. In terms of online resources, TWSE has also added new product pages or labels in the ETF section of its official website and the ETFortune page. It has also provided digital teaching materials to enable investors to clearly understand the characteristics and identification of the new products, the differences between active and passive ETFs, and the related risks through multiple channels and media. TWSE expects to raise investors’ awareness and acceptance of new products and to enable them to select products suitable for them according to their own risk tolerance.

Investors should note that active ETFs are not guaranteed to achieve or exceed benchmarks or market returns. As past results of an ETF do not guarantee future returns, investors are advised to assess the investment risks carefully and read the prospectus before making an investment. TWSE would continue to provide the latest publicity materials in the ETF section of the website, ETFortune and the Facebook for investors to understand the knowledge and risks of the new products.

As the financial regulator has liberalized the regulations for active ETFs and passive multi-asset ETFs, it is expected that in 2025, new products will be introduced to the market one after another, which will bring many positive impacts to Taiwan’s capital market:

I. Attracting New Domestic and Foreign Investors, Bringing Vitality to Taiwan Stock Market

Active ETFs are expected to attract investors who seek higher returns through the active management by fund managers, while passive multi-asset ETFs provide one-stop asset allocation solutions to minimize the impact on investment portfolios due to fluctuations in individual assets, which is more attractive to prudent investors or those who are retired, thus satisfying the diversified needs of investors.

The performance of stock market in Taiwan has been remarkable among the major markets recently. The promotion of new products will help attract foreign investors and develop diversified strategies through different products, which brings vitality to Taiwan’s capital market.

II. Providing More Opportunities for Global Collaboration and Promoting the Internationalization of Taiwan’s Markets

Taiwan’s ETF market has been booming over the years, especially with high dividend and ESG being the most popular products among investors. By opening up active ETFs and multi-asset ETFs in response to the global trend, the financial regulator will not only be catching up with the world, but also integrating the localization characteristics in Taiwan, which is conducive to the further development for global collaboration.

The TWSE has been actively cooperating with other countries in various ways. Currently, the TWSE is studying the cross-listing mechanism for ETFs, pushing domestic companies to use Taiwan stock indexes or link Taiwan stock ETFs to issue financial products in overseas markets, as well as cooperating with international index companies in compiling indexes. The opening of new products provides new options for various international collaboration opportunities and promotes the internationalization of Taiwan’s capital market.

III. Attracting Global Players to Enter the Taiwan Asset Management Market to Enhance Its Competitiveness

As Taiwan’s ETF market continues to grow and become one of the fastest growing ETF markets in the world, adding new products to the market at this moment provides the best opportunity for foreign issuers to enter the Taiwan market through their new products. We expect that new issuers will participate in the market in the future, further expanding the market size of Taiwan ETFs and providing investors with more diversified choices.

The brand effect from international issuers will help attract global investors’ attention to the Taiwan market, which will further enhance the market’s liquidity. It may also lead its global investor network into the Taiwan market, providing more opportunities for Taiwan stocks and diversified assets.

In addition, the global vision and experience from the international issuers are expected to help the market in Taiwan to become more internationalized, including cross-listing ETF cooperation by leveraging their international network, which will also help to promote technological innovations in the market, and is expected to encourage the exchanges between domestic and foreign professionals, and to further cultivate professional talents in asset management in Taiwan.

IV. Adding Depth and Breadth to Taiwan Stocks Improving Market Efficiency

Active ETFs are expected to boost the trading volume in some stocks, especially the underlying selected in the relevant active strategies. Moreover, their strategic operations may increase the market price discovery efficiency, which will have a positive impact on the long-term market efficiency. Multi-asset ETFs, on the other hand, may boost capital flows in Taiwan stocks and bonds, increasing market diversity as well as attracting new capital to the market. These two new type of ETF products will expand the depth and breadth of the market and are expected to enhance market efficiency.

ETFs have been rapidly developing in the global and domestic markets over the years, demonstrating that they have become one of the most important products in the modern capital market. With its low cost, convenient and highly transparent features, ETFs are widely chosen by investors and have become one of the most important choices for asset allocation. As the global capital market transforms and the demand for investment becomes increasingly diversified, the ETF development is not only limited to passive trading strategies, but is also moving toward active management and multi-asset allocation. The market in Taiwan has also responded to the international trend by actively promoting the innovation in related systems and products to attract both asset management companies and investors to participate in the market in order to contribute to the market’s success.

As a capital market developer, the TWSE has always been committed to the product diversity of the capital market and has acted as a coordinator between policy and market demand, actively assisting the financial regulator in developing and promoting new products. The TWSE has not only actively introduced the mature ETF products from the international market over the past few years, but has also optimized its regulatory framework to provide a more friendly trading environment for market participants. Through these efforts, the Taiwan ETF market has developed a diversified selection of ETF products covering equities, bonds, commodities, thematic investments, etc. This has further enhanced the competitiveness of the market and attracted domestic and foreign investors to engage in the market.

In terms of market development trend, the opening up of active ETFs and passive multi-asset ETFs will help enrich not only the depth but also the breadth of Taiwan’s ETF market. Active ETFs are expected to bring more diversified returns through fund managers’ professional stock selection and dynamic adjustment strategies, thus satisfying the needs of investors who seek excess returns or specific objectives. Passive multi-asset ETFs, on the other hand, combine different types of assets, including equities and bonds, to provide a more stable investment option, which is suitable for investors who seek asset allocation and risk diversification. These innovative ETF products will not only meet the growing demands from investors, but also encourage foreign investors to enter the Taiwan ETF market and participate in the issuance of new products, which will further contribute to the development of Taiwan’s capital market.

To stimulate the ETF market popularity and growth, the TWSE plans to actively educate investors in order to enhance market awareness and investment confidence in the future. By organizing investment seminars, distributing press releases and feature stories, and providing online learning resources, investors are able to understand more clearly the operation mode and potential advantages of active ETFs and passive multi-asset ETFs. Furthermore, the TWSE would help issuers to launch new products successfully by providing necessary listing advice and counseling to ensure that the market can operate smoothly, thereby implementing the financial inclusion goal.

Also, in order to diversify ETF products, the TWSE would continue to study the cross-listing mechanism for ETFs to enhance the international market connection and to attract more foreign investors to invest in the Taiwan capital market. The cross-listing arrangement for ETFs may facilitate the internationalization of the capital market, enabling investors to invest in global markets through the domestic capital market, thereby adding the investors’ options to their investment choices. At the same time, the TWSE would constantly pay attention to the development of various types of fund of funds, target date funds and other innovative products in the international market, and assess their feasibility in the Taiwan market, so as to further expand the ETF product line.

For the future, the TWSE would cooperate with all market players under the guidance of the financial regulator to promote Taiwan as an asset management center in Asia and to build a more mature and more competitive ETF market in the world. By improving the market mechanism, optimizing the regulatory framework and educating investors, the Taiwan ETF market will continue to grow, attracting more domestic and foreign investors, enhancing market liquidity and scale, thereby achieving new peaks for the vitality and resilience of Taiwan’s capital market.