Taiwan’s FSC gives nod to leveraged and inverse ETFs

05 June 2014   Category: News, Asia, Global, Taiwan   By Hui Ching-hoo

Taiwan’s Financial Supervisory Commission (FSC) has given the green light for local asset managers to launch leveraged and inverse ETFs, according to the Economic Daily News

An official from the FSC told local media that the regulator is set to open up the market to the new products, noting that exotic ETFs have been gaining traction overseas in recent years, as they enable investors to garner returns that trump the underlying index.  

With the availability of new flavours of ETFs, commodity-based funds, Taiwan’s ETF landscape will become more comprehensive, the official added.  

Given their nascent state in the island, the regulator said that it was considering stipulating a lower leverage ratio for inverse products compared to ETF markets elsewhere.

Julian Tsung-Sheng Liu, president and CEO of Yuanta Securities Investment Trust Company, previously told Asia Asset Management that: “With the high exposure of leverage and inversed ETFs, the products will only be limited to sophisticated investors.”

He added: “Yuanta has done a lot of preparatory tasks on investor education and product designs in anticipation the exotic ETFs approval will be granted in the second half this year.”

The Taiwan Stock Exchange (TSE) earlier anticipated that the emergence of leveraged and inverse ETFs would help to boost the trading volume of these products to 5% total turnover in two to three years from their current level of 1%.