TWON: Taiwan Small-Cap ETF From IndexIQ

IndexIQ is proceeding apace with its family of single-country small-cap ETFs.  Australia (KROO) and Canada (CNDA) were first, South Korea (SKOR) came out last month, and as of 5/19/10 we have IQ Taiwan Small Cap ETF (TWON).  Unfortunately TWON is being introduced at a weak time for Asian stocks, but may still find an audience.

Taiwan (formerly known as Formosa) is an island nation off the coast of mainland China.  By almost any standard, it is a wealthy, industrialized nation and home to one of Asia’s most dynamic economies.  Development after World War II was heavily export-driven and Taiwan today supplies much of the world’s consumer electronics.  With its entrepreneurial history, there should be no surprise that Taiwan has a thriving small-cap stock market.

TWON follows the IQ Taiwan Small Cap Index, which currently consists of 99 component Taiwan-domiciled or listed companies.  The index is capitalization-weighted and float-adjusted.  Top holdings include Ralink Technology, Radiant Opto-Electronics, Greatek Electronics, D-Link Corp., Giga-Byte Technology, Altek Corp., and China Synthetic Rubber.

The fund has an expense ratio of 0.79% and may incur foreign taxes estimated to be 0.12%, placing total fees at 0.91%.  According to the TWON fact sheet (pdf), sector allocations as of 5/19/10 looked like this:

• Technology 30.3%
• Industrials 27.7%
• Materials 18.3%
• Consumer Discretionary 9.5%
• Financials 6.0%
• Transportation 4.6%
• Consumer Staples 2.1%
• Energy 0.8%
• Health Care 0.5%

Not surprisingly, TWON is heavy on Technology and Industrials; those two sectors together account for 58% of assets.  This actually makes it quite a bit more diversified than the better-known iShares MSCI Taiwan Index ETF (EWT) which focuses on large-cap stocks and is over 60% technology-weighted.  In fact, anyone seeking exposure to Taiwan might want to consider pairing EWT and TWON together to get broader exposure.  There seems to be little or no overlap in the holdings of the two ETFs.

For more information, you can check out the TWON summary pageat the IndexIQ site.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.