TWSE touts ETFs tracking NASDAQ index to hedge risks

2017/02/16 23:04:35 fontsize-small fontsize-default fontsize-big
TWSE touts ETFs tracking NASDAQ index to hedge risks

Taipei, Feb. 16 (CNA) Investors are being encouraged by the Taiwan Stock Exchange (TWSE) to buy into a new umbrella fund comprised of two Exchange Traded Funds that track movements on the tech-heavy NASDAQ index to hedge risks.

According to the TWSE, which operates the local main board, Fubon Asset Management Co. (富邦投信) has established the umbrella fund, which has the Fubon NASDAQ-100 1X Inverse Index ETF and Fubon NASDAQ-100 2X Leveraged Index ETF.

An umbrella fund is a collective investment scheme and operates as a single legal entity but has several sub-funds, like the two ETFs, which are under the roof of the Fubon umbrella fund.

The Fubon NASDAQ-100 1X Inverse Index ETF will track the NASDAQ-100 1x Short Index, so when the NASDAQ index moves lower, investors are expected to make a profit.

Meanwhile, the Fubon NASDAQ-100 2X Leveraged Index ETF will use the NASDAQ 100 Double Leverage Index as its underlying index, so when the NASDAQ index moves higher, investors are expected to make double gains.

By taking advantage of the two ETFs, the TWSE said, investors will take on the short term volatility faced by the NASDAQ index.

The two new ETFs are scheduled to be listed on the main board on Feb. 21, according to Fubon Asset Management.

The two Fubon Asset Management ETFs tracking the NASDAQ index come in the wake of the company listing the Fubon NASDAQ-100 ETF on the main board in June 2016.

Liao Chung-wen (廖崇文), director of Fubon Asset Management's quantitative and index investment division, said that as the NASDAQ index is increasingly correlated to the local equity market, in particular Taiwan's bellwether electronics sector, over the next three years investors who hold local equities can use the umbrella ETF fund as a tool to hedge risks.

In particular, Liao said, the Fubon NASDAQ-100 1X Inverse Index ETF will serve as a buffer for investors as U.S. high-tech stocks turn volatile.

Liao said that investors should pay close attention to fluctuations in the E-mini NASDAQ-100 futures traded on the Chicago Mercantile Exchange as the financial product can also be used to determine the future movement of the NASDAQ 100 Index.

(By Tien Yu-pin and Frances Huang)
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