Taiwan Retail Investors’ Fervor for ETFs Drives Sales to Record

Chien-Hua Wan and Sangmi Cha, Bloomberg News

, Source: Bloomberg, Taiwan FSC; YTD number is estimated by adding January-February net inflows and March issuance

(Bloomberg) -- A record rally in Taiwan stocks is luring retail investors to pile into exchange-traded funds, as local regulators stepped up warnings on the herding behavior.

Two new stock ETFs this month raised a combined NT$223 billion ($7 billion), with the latest one which ended subscriptions Friday setting a record. This brings the total inflows into equity ETFs to some NT$340 billion, more than half of last year’s, underscoring how the global market frenzy around artificial intelligence is spurring local demand for exposure to a technology-heavy market.

Taiwan’s central bank governor last week described the investors as “a swarm of bees,” warning the rapid gains in stocks could be a bubble and they need to “think calmly.” That is set to be a challenging job, as local stocks are powered by a record rally in Taiwan Semiconductor Manufacturing Co., which supplies the majority of the advanced chips used for AI.

Yuanta Taiwan Value High Dividend ETF has raised NT$170 billion, according to Financial Supervisory Commission, breaking a record set by UPAMC Taiwan High Dividend Momentum ETF earlier in the month at NT$53 billion. Some brokerages, including E.SUN Securities Co., have stopped accepting new investors due to over-subscriptions.

“The future outlook of the constituent stocks should be taken into account in purchasing any ETFs, and past performance does not equate to future performance,” said FSC chairman Huang Tien-mu at a briefing Monday. He added that the ETF issuance will be the focus of regulatory checks on financial firms.

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--With assistance from Jack Wang.