Domestic investors hunting for dividends are propping up Taiwan’s stock market, while foreigners concerned about China-US trade tensions flee.
Taiwan’s benchmark Taiex gauge has eked out a 1.9% gain this year as South Korea’s Kospi lost 7.2% and the Shanghai Composite Index tumbled 16% to be among the worst performers in the world. This disparity comes even as foreign investors have sold a net $9.8bn of Taiwan stocks this year, the most in Asia after Japan.
“A lot of investors, particularly retail investors, have been trying to deleverage risk,” said James Yeh, chief investment officer for Taiwan equities at JP Morgan Asset Management in Taipei. “For Taiwan stocks, the dividend yield is quite stable and decent.”
Stocks in Asia have been battered by rising China-US trade tensions, and Chinese investors have also had to worry about a slowing economy and a government drive to curb debt. 
Meantime, the Taiex gives investors a dividend yield of 4.1%, which is among the highest in Asian markets. Beyond Asset Management president Michael On also said that exports have done well, with outbound shipments growing at least 9.4% on-year in each of the last four months.
The Taiex has been supported by surprising performances from smartphone component makers Yageo Corp and Walsin Technology Corp, which have been the stock benchmark’s two biggest boosts this year. Yageo, which has surged more than 1,100% since the start of 2017, has benefited because Chinese production of its products has been cut as part of efforts to curb pollution, said Allan Lin, assistant vice president at Concord Securities Co in Taipei.
Yeh said investors have bought large-cap, non-tech shares in their pursuit of dividend yields. Formosa Plastics Corp and Nan Ya Plastics Corp have also been among the biggest boosts to the Taiex this year, as have noodle maker Uni-President Enterprises Corp and convenience store operator President Chain Store Corp.
To be sure, analysts expressed concern that Taiwan stocks will suffer if the trade dispute escalates.
“Semiconductors are the main battlefield in the US-China trade war,” Concord’s Lin said. “Without US technology, Chinese companies will be in wait-and-see mode in investing in advanced technology, such as semiconductors. Shares of equipment suppliers have already reflected that worry.” Still, the Taiex has managed to advance after each monthly drop so far this year. The island’s stocks should be able to weather the US’s threatened expansion of the trade war and China’s likely retaliation as long it doesn’t start affecting smartphone supply chains, Yeh said. “We continue to believe that the Taiwanese equity market has already priced in most of the negatives,” he said.


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