Franklin FTSE Taiwan ETF

FLTW

Market cap $2.08B

The top U.S. diplomat in Taiwan on Monday pressed the island's ​opposition-majority parliament to pass a "comprehensive" defence budget, saying integrated air and missile defence systems and ‌drones are critically important and in high demand globally.

Funds with ties to the AI boom in emerging markets like South Korea, Taiwan and Peru could make a run-up to rival the Magnificent Seven

Franklin FTSE Taiwan ETF (FLTW) is a concentrated play on semiconductors and AI infrastructure, with 21.7% in TSMC and over 70% in tech. FLTW's performance and risk profile are tightly linked to TSMC's earnings, semiconductor industry cycles, and high capital expenditure requirements. At a forward P/E of 21.8x, strong growth is already priced in; further upside requires continued robust demand and positive earnings surprises.

Mainland investors were rare net sellers of Hong Kong-listed stocks overnight, a rare occurrence these days, totaling about $160 million. China YTD retail sales growth was stronger than expected.

Taiwan's exports hit the fastest growth since early 2010, as artificial-intelligence-powered demand continues unabated.

The Franklin FTSE Taiwan ETF is one of two ETFs that offer pure-play coverage to Taiwanese stocks, with giant-caps accounting for the majority of the portfolio. FLTW has some structural flaws, but in the areas where it matters (cost efficiency, performance track record), it shines over its larger peer, EWT. Taiwanese exports are currently growing at a record pace of over 50%, with tech exports fuelling this momentum (FLTW has 70% exposure to tech stocks).

Easing tensions between China and the U.S. may be supportive of markets. Still uncertainty amid plans for Trump to visit China in 2026.

Despite mounting macro headwinds at the start of the year, Chinese equities have continued to deliver positive performance. While near-term flows can provide further upside, the durability for the equity rally will hinge on policy choices ahead.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.

Herald van der Linde from HSBC Global Research shares his Asian markets picks and explains why 'particularly cheap' South Korean equities could outperform Taiwanese equities this year.