Taiwan ETFs – going from strength to strength

Since the beginning of the decade, the Taiwanese stock market has undergone an extraordinary transformation. The market’s total capitalisation has more than doubled to USD2.2 trillion since 2019, as the island benefits from its key role in the global supply chain for semiconductors¹.

At the same time, local investment conditions have propelled Taiwan into one of the world’s fastest growing markets for exchange traded funds (ETFs), with ETFs accounting for two-thirds of the island’s onshore public fund assets².

“The Taiwanese ETF market is on the brink of significant transformation as it transitions into ETF 2.0. A convergence of regulatory support, technological innovation, product diversification and investor preferences will inevitably shape the future of this sector. As Taiwan fortifies its status as a hub for Asian asset management, the market is set to attract considerable capital inflows,” said Julian Liu, Chairman of Securities Investment Trust and Consulting Association of Taiwan.

Supercharged growth in ETFs

Over the last ten years, local assets under management held by ETFs grew 36 times, while there was a ten-times increase in the number of ETFs listed locally over the same period. Taiwan now has Asia’s third largest ETF market, after mainland China and Japan, with a total AUM of USD195 billion³.

“The rapid rise of Taiwan’s ETF market makes it a highly attractive destination for the issuers of listed investment products – especially for international asset managers that can utilise their global experience to meet growing demand for innovative products,” said Suvir Loomba, Regional Head of Securities Services, Asia, HSBC.

High levels of interest from the public are a key driver behind the development of Taiwan’s ETF market, with around 70% of the market’s ETF assets held by retail investors⁴.

Robust economic growth in Taiwan is creating wealth among the local population. In 2024, the economy grew by 4.3%⁵, driven largely by the semiconductor industry, which is booming due to AI-related demand. Strong returns have renewed interest among individuals in the stock market, which has helped direct the island’s excess savings towards ETFs. Furthermore, Taiwan’s younger people are particularly interested in ETFs, with people aged from 21 to 40 accounting for more than 50% of total investors⁶.

Diverse strategies

Taiwan’s ETF market already boasts a wide range of strategies, with new products on the horizon.

Products that focus on dividend returns have proven very popular, due to the low rates on offer in local banks. Leveraged ETFs are also highly traded, as investors try to capitalise on buoyant markets in Taiwan and mainland China. When it comes to thematic products, ETFs with an emphasis on sustainability and technology are among the ten-most traded on the market⁷.

The strong demand for ETFs in Taiwan has created a steady a pipeline of new product launches. While local asset managers are already well established, foreign issuers are becoming increasingly active, with many coming to the market for the first time. In the first three months of 2025, half of the new ETFs listed on the island were by international asset managers⁸.

International issuers are expected to be involved in the launch of active ETFs and passive multi-asset ETFs, which were permitted by the regulator for the first time last year. Although these will be new products in Taiwan, they are a mature product category in overseas markets. International issuers with prior experience of operating active and multi-asset ETFs will be able to bring their broad experience in these products to release funds that stand out from the competition.

Issuers of ETFs should be aware of operational nuances that are particular to Taiwan, which can increase the reliance on an asset services provider – in particular, there are requirements and market practices related to the calculation of a fund’s net asset value, expectations of an ETF’s initial IPO, connectivity to local ETF ecosystem around primary market orders, and the payment of dividends, that all are unique to the market.

The Taiwan advantage

Local idiosyncratic factors show how issuers in Taiwan can benefit from partnering with an asset services provider that has a global operating models and technology stack that is customised to account for local requirements.

HSBC is the largest international securities services providers in the market, and we are working with multiple international issuers to roll out ETF services in Taiwan. Our comprehensive range of services covers the entirety of an issuer’s entire spectrum of needs: including fund administration, transfer agency and global custody.

“As one of the largest fund administrators in Taiwan, HSBC is well-placed to help asset managers capitalise on ETF opportunities in this rapidly developing market, offering the full range of global and local support that issuers need, so that they can hit the ground running,” said Fiona Horsewill, Global Head of Securities Services, HSBC.

HSBC’s ETF servicing capabilities in Taiwan have been designed to operate seamlessly with the capabilities provided by our global platforms. The platform not only fulfils all current local requirements, but at the same time provides a strong foundation for further enhancements of the operating model to cater to evolving market needs. This is a key differentiator which allows us to deliver services according to global best practices that are seen in more developed markets.

Furthermore, our capabilities are acknowledged by leading industry awards. In 2024, The Asset Triple A Asset Serving Awards recognised us as Best in Asset Servicing, Best ETF Custodian, and Best Fund Administrator – Retail Funds. Also last year, ETF Stream named us ETF Administrator of the Year.

This unique combination of localisation, transparency, and global consistency makes HSBC stand out from other asset service providers in Taiwan. These strengths, in addition to our ability to offer local and international support, puts us in a strong position to help asset managers realise their Taiwan ETF ambitions.