Taiwan Stock Exchange unveils two smart beta equity indices

Jul 28th, 2016 | By | Category: ETF and Index News

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Taiwan Index Plus (TIP), a subsidiary of the Taiwan Stock Exchange, has rolled out two new smart beta indices focusing on locally-listed dividend-paying equities. The launches pave the way for the development of investment products such as exchange-traded funds to cover the space.

Taiwan Stock Exchange unveils two smart beta equity indices

The ‘TIP TAIEX+ Dividend Appreciation 100 Index’ and the ‘TIP TAIEX+ Dividend Appreciation 150 Index’ target Taiwan-listed dividend-paying equities while weighting constituents by fundamental metrics.

The ‘TIP TAIEX+ Dividend Appreciation 100 Index’ (DVA 100 Index) and the ‘TIP TAIEX+ Dividend Appreciation 150 Index’ (DVA 150 Index) are derived from the widely followed TAIEX series, which tracks the market cap-weighted performance of all large cap companies listed on the Taiwan Stock Exchange.

The DVA 100 Index tracks the return of the top 100 TAIEX-constituent companies with a history of increasing dividends over the past ten years, while the DVA 150 Index tracks a larger group of 150 TAIEX-constituents using the same methodology. Each index is weighted according to fundamental characteristics. The DVA 100 Index will be reviewed twice a year in May and November, while the DVA 150 Index will be reviewed annually in May.

The new indices are likely to find favour with long-term institutional investors such as pension funds in Taiwan and around the world who are seeking stable returns.

TIP was established as a wholly-owned subsidiary of the Taiwan Stock Exchange in March 2016 to focus on running the exchange’s index businesses. TIP’s responsibilities include the development of new investable products and the maintenance of existing indices, as well as the development of the exchange’s business by licensing current and future indices for the creation of investment products such as exchange-traded funds.

Future indices that may be developed include leveraged and inverse indices, equal-weighted indices, dividend point indices, thematic indices, smart beta indices, and other customised indices.

Taiwan is expected to see an increase in smart beta activity on exchange following the signing of a memorandum of understanding between index provider STOXX and Japanese trust bank Mitsubishi UFJ Trust and Banking Corp. (MUTB), to expand the smart beta footprint in Taiwan. Under the terms of the agreement, Yuanta plans to license a wide variety of STOXX indices – in particular, from STOXX’s smart beta suite which includes the iSTOXX MUTB Indices – to increase its smart beta offerings to retail and institutional clients in Taiwan.

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