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Nov 2019

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Taiwan: Life insurers make local ETF market the fastest growing in the world

Source: Asia Insurance Review | Aug 2019

A surge in bond buying by life insurers has made Taiwan’s exchange-traded fund (ETF) market the fastest growing in the world, reported Bloomberg.
 
Taiwan’s insurers are snapping up ETFs domiciled locally, but comprised mostly of US corporate bonds, as they seek to offset lower yields on other investments. That has spurred a 67% growth in the ETF market this year - faster than all the Group of Seven economies as well as China – pushing its overall size to $41bn, data compiled by Bloomberg showed.
 
Taiwan’s ETFs are also grabbing share from traditional products, with assets growing to the equivalent of 50% of those held in mutual funds versus 18% early last year. Unlike mutual funds, ETFs can be traded in real time. 
 
“The trend is expected to continue in the second half of the year due to the investment needs of insurers,” said Taiwan’s Securities Investment Trust and Consulting Association chairman Jeff Chang adding that a bullish outlook for bonds will also boost the market. 
 
This is in spite of Taiwan’s central bank previously warning that insurers buying local ETFs comprised of foreign assets increases the industry’s exposure to risks in currency fluctuations.
 
In Taiwan, insurers account for 93% of the assets invested in the bond ETF market, data from the Financial Supervisory Commission show. A 
 
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