TWSE Market Insights

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The Chinese term puyu (璞玉), literally “uncut jade,” is often used metaphorically to describe people or things with strong underlying qualities that have yet to attract wider attention . The same idea can be applied to the capital market: beyond the stocks currently in the market spotlight are listed companies with sound fundamentals that have attracted relatively limited investor attention.

Trading activity in Taiwan’s equity market has expanded rapidly in recent years, accompanied by greater concentration in a relatively small group of stocks. Between 2022 and 2025, the aggregate trading value of TWSE-listed stocks increased from approximately NT$56 trillion to NT$93 trillion. According to Taiwan Index Plus Corporation (TIP), however, the top 10% of TWSE-listed stocks by trading value accounted for 75% of the total trading value of all TWSE-listed stocks in 2025, reflecting strong investor interest in popular industries and individual stocks.

Companies that embody the “pristine” concept also play an important role in Taiwan’s capital market. The fact that some companies are not currently among the most actively traded stocks does not mean that they lack solid fundamentals. Beyond the market spotlight, many companies continue to deliver stable earnings and dividend performance. This market observation inspired the name of the TIP Taiwan Pristine Stock Index. Through a transparent and periodic-review index methodology, the idea of “pristine gems” is transformed from a metaphor into an observable, trackable, and regularly reviewed portfolio of stocks, providing the market with another perspective on Taiwan’s high-quality companies.

TIP has designed two screening dimensions, “Quality” and “Under-the-Radar,” to assess companies’ fundamental performance and the degree of market attention they receive:

• Quality: This dimension examines the consistency of a company’s earnings and dividend payments. Eligible companies must have reported positive earnings per share for each of the most recent three fiscal years and each of the latest four quarters, and must have paid dividends in each of the most recent three years. This approach takes into account both recent operating performance and the sustainability of earnings over a longer period.
• Under-the-Radar: Using the most recent three months as the observation period, this dimension evaluates five indicators: trading value, free-float turnover rate, trading volume, price momentum, and daily return volatility. Stocks ranking in the top 10% of the market on any of these indicators are excluded, thereby identifying securities with relatively lower trading activity that have yet to become a major focus of market attention.

TWSE-listed stocks that meet both the “Quality” and “Under-the-Radar” criteria are eligible for inclusion in the Index. The Index does not have a fixed number of constituents and is weighted by free-float market capitalization. The number of constituents and their distribution by industry and market capitalization are determined by the stocks that meet the eligibility criteria at each periodic review. The result is a portfolio characterized by stable earnings and dividend payments while remaining relatively less actively traded.

Following the launch of the first TIP Taiwan Pristine Stock Index on January 26, 2026, TIP extended the core concepts of “Quality” and “Under-the-Radar” to develop the Taiwan Pristine Index Series, with differentiated methodologies designed to meet different investment objectives.

I. TIP Taiwan Pristine Stock Index: The Original Index in the Series

The Index draws its universe from TWSE-listed stocks and does not prescribe a fixed number of constituents, allowing all eligible listed companies to form the portfolio based on the index methodology. Following the April 2026 periodic review, the Index comprised 331 constituents across 31 industries. Of these, 314 were mid- and small-cap stocks, representing 95% of the total number of constituents, resulting in a broadly diversified portfolio with a strong representation of mid- and small-cap companies.

During the heightened volatility in Taiwan’s equity market in July 2026, amid a sharp correction in global equity markets, the TAIEX Total Return Index declined by 5.91%, while the TIP Taiwan Pristine Stock Index fell by only 3.47%, demonstrating its relatively defensive characteristics.

II. TIP Customized Taiwan Pristine Premium Yield Index: Income-Oriented Strategy

The investment universe is expanded to include both TWSE and TPEx-listed stocks. The Index incorporates dividend performance, return on equity (ROE), quarter-over-quarter growth in net income after tax, and price momentum to further identify under-the-radar stocks with potential value while strengthening the portfolio’s income characteristics. The Index comprises 50 constituents.

Historical backtesting from June 2016 through May 2026 showed an annualized index return of 23.85% and an annualized index dividend yield of 9.41%, compared with 22.49% and 4.39%, respectively, for the TAIEX Total Return Index.

III. TIP Taiwan Pristine SAM-Cap Select 100 Index: Focus on Mid- and Small-Cap Stocks

The Index excludes the 50 largest TWSE-listed stocks by market capitalization. After applying screens based on profitability, dividend payments, and market attention, 100 constituents are selected based on operating stability and revenue growth.

Historical backtesting from April 2007 through May 2026 showed an annualized index return of 14.30%, compared with 13.45% for the TAIEX Total Return Index. In 2025, the Index recorded a dividend yield of 4.74%, also higher than the TAIEX Total Return Index’s 4.03% over the same period. The results indicate that, after excluding the 50 largest stocks by market capitalization and stocks attracting high levels of trading activity, the resulting rules-based portfolio delivered performance comparable to or better than the broader Taiwan equity market benchmark over the backtest period.

To reflect the development of new-economy industries and sustainability trends, TWSE revised its industry classification for listed companies in 2023. Effective July 3 of that year, four new industry categories—green energy and environmental protection, digital cloud, sports and recreation, and home living—were introduced, expanding the total number of industry categories from 29 to 33. At the same time, the tourism and hospitality industry was renamed, bringing the classification system more closely in line with market developments and corporate characteristics. 

TWSE-listed companies span a diverse range of industries, encompassing electronics and technology, traditional industries, financial services, and emerging new-economy businesses. Companies across these industries have developed competitive strengths in technology, manufacturing, brands, distribution channels, and supply chains, collectively demonstrating the diversity of Taiwan’s industrial landscape.

Following the April 2026 periodic-review, the TIP Taiwan Pristine Stock Index covered 31 TWSE industry categories, encompassing nearly all major industries represented by TWSE-listed companies. Importantly, the “Pristine” concept is not limited to any particular industry. Even within the well-known electronics and technology sector, some companies have built long-standing expertise in critical manufacturing processes, components, and specialized technologies and play important roles in the electronics supply chain. Those with relatively lower levels of market trading activity may also meet the Index’s selection criteria.

Looking beyond the financial and market-trading criteria used in index construction, the constituents also demonstrate strengths in other corporate characteristics. Excluding companies not required to disclose relevant employee compensation information, 188 of the 299 applicable constituents, or approximately 63%, ranked in the top 50% of all TWSE-listed companies in terms of median employee compensation. In addition, based on the periodic-review of the TWSE Corporate Governance 100 Index, 41 of its constituents were also constituents of the TIP Taiwan Pristine Stock Index. These figures indicate that among companies receiving relatively limited trading attention, many remain competitive in areas such as employee compensation and corporate governance, extending the “Pristine” concept beyond financial screening to provide a more comprehensive picture of the competitiveness of Taiwanese companies.

An index does more than measure market performance. It can also translate an abstract investment concept into a transparent, trackable, and regularly reviewable set of rules. The TIP Taiwan Pristine Stock Index is built around the core concepts of “Quality” and “Under-the-Radar,” while subsequent indices have extended the concept to income-oriented and mid and small-cap strategies. This demonstrates how an index series can evolve in response to different market needs. By varying the investment universe, factor criteria, number of constituents, and weighting methodology, the indices provide asset managers with a foundation for developing differentiated investment products.

To transform the Pristine concept from a market observation into accessible investment tools, TWSE and TIP will continue to promote product diversification and maintain close communication with asset managers, securities firms, and other market participants to understand issuers’ product plans and investor needs. From the perspectives of liquidity, tracking feasibility, investment capacity, risk disclosure, and trading mechanisms, TWSE and TIP will support the market in exploring opportunities to develop ETFs and other index-linked products based on the Taiwan Pristine Index Series.

The objective of product development is not simply to increase the number of products available. Rather, it is to enable investors to look beyond large-cap stocks, popular industries, and individual investment strategies and gain exposure to Taiwanese companies of different sizes, industries, and investment characteristics. A more diverse range of indices and investment products can provide new perspectives for capital allocation, support asset managers in developing differentiated products, and offer investors a broader range of references for investment and asset allocation. Beyond AI and semiconductors, products linked to the Taiwan Pristine Index Series can provide investors with a more comprehensive and balanced way to participate in the development of Taiwan’s diverse industries, contributing to the long-term development of a more balanced and resilient capital market.

From broad-based discovery and enhanced income strategies to a focus on selected mid- and small-cap companies, the Taiwan Pristine Index Series is built on the common foundation of “Quality” and “Under-the-Radar,” with the investment universe, screening criteria, and weighting methodology tailored to the objective of each index.

Taiwan’s strengths extend well beyond AI and semiconductors. Across its 33 industry categories are numerous companies characterized by sound operations, competitive human capital, and strong corporate governance that have yet to receive broad market attention. Through transparent, rules-based index methodologies, together with continued engagement with issuers and other market participants to facilitate product development, the Taiwan Pristine Index Series systematically highlights companies that are outside the market spotlight but demonstrate stable earnings and dividend characteristics.

In doing so, the Series showcases the diversity of Taiwan’s industries and the breadth of competitive investment opportunities available in its capital market, giving investors an opportunity to participate in the growth of Taiwan’s “hidden champions” and share in the achievements of Taiwan’s industrial development.