Taiwan Stock Exchange

The Taiwan Stock Exchange (TWSE) is the leading securities exchange in Taiwan, a country with a fast-developing economy driven notably by its manufacturing and technology sectors. This 2024 guide will rank the best Taiwan Stock Exchange brokers, outline what the TWSE is and explain how to invest in its products and derivatives.

Choosing Taiwan Stock Exchange Brokers

Although the Taiwan Stock Exchange is now a leading marketplace, it does not carry the same weight as the Hong Kong Stock Exchange (HKEX). That said, there are online brokers with access to the Taiwan Stock Exchange and below we list the main areas to consider when comparing firms:

• Trading Fees – Some TWSE brokers like IG Index prefer the zero commission model for CFD indices, where fees are included in the spread, whereas others like Interactive Brokers (IBKR) keep spreads tight and charge higher commissions instead. Odd lot trading may incur a proportionally larger commission than standard lot trades. But just because a broker is offering TAIEX or TWSE stocks with no commission, does not automatically mean you should choose them – take all the fees into account before making your decision. This includes any overnight fees, inactivity fees, deposit and withdrawal fees and currency conversion fees (note that shares on the exchange are traded in the New Taiwan Dollar). Some traders will track the exchange using an ETF, in which case expense ratios should also be accounted for.
• Trading Platforms – TWSE brokers may use external platforms like MetaTrader 4 (MT4), MetaTrader 5 (MT5) and TradingView or offer a proprietary platform. Although MT4 and MT5 are recognised across the industry, there are high-quality in-house platforms too, so choose one that aligns with your investing strategy and needs. MT4 has 30 built-in technical indicators, nine timeframes, historical data and real-time live quotes but not all brokers provide it.
• Additional Features – Social trading platforms like that created by eToro are becoming more common and allow for investing ideas to be shared across the community. Learning how to evaluate stocks on the exchange or formulate a successful strategy can be challenging, which is why Taiwan Stock Exchange brokers with well-resourced education sections should also be sought.
• Trading Vehicles – Whether it is stocks, ETFs, CFDs, spread betting, options or futures, check to see what the broker offers. IG Index, for example, offers ETFs and CFDs for those wanting to track the exchange’s main index, the TAIEX. Remember that some vehicles carry more risk – CFDs are generally leveraged, which can magnify both profits and losses.
• Customer Support – The TWSE is only open Monday to Friday and not at weekends. 24/5 customer support is therefore adequate, although leading Taiwan Stock Exchange brokers will offer 24/7 contact options.
• Regulation – When trading the TWSE, it is important that you are protected from scams and malpractice. This largely depends on whether the broker is regulated by a reputable authority or not. The best regulator of TWSE brokers for UK traders is the FCA. AvaTrade is one such broker regulated by the FCA.

Foreign investors may have to submit ID in addition to their broker submitting a registration form to the TWSE before the individual can begin trading. If the application is approved by the TWSE, a brokerage account can be opened.

Also, note that some Taiwan Stock Exchange brokers may have trading rules or market restrictions that prohibit scalping strategies.

Pros & Cons Of Trading On The TWSE

• Volatility – as with all instruments, the value of TWSE assets can go up or down over time. Between January and March 2023, the TAIEX increased by 11.24%. However, in 2022, the index saw a decline of 22.4%.
• Diversification – the TWSE contains a variety of companies from multiple different sectors and countries. Whether it is Cathay Financial in the financial services sector or Medigen Vaccine Biologics Corporation in the healthcare sector, the diversification of the exchange helps spread risk.
• Risk – Taiwan is a prosperous island with a dynamic economy. With many years of economic growth in its recent history, there are opportunities for traders at TWSE brokers. The island also has a global outlook, forging strong ties with Japan through the Japan-Taiwan Exchange Association. However, there is significant geopolitical uncertainty over Taiwan’s future, which could impact markets.

How Does The Taiwan Stock Exchange Work?

Established in 1961 and based in Taipei, the Taiwan Stock Exchange is operated privately by the Taiwan Stock Exchange Corporation and is the island’s primary marketplace.

Contrary to some alternatives like the Shanghai Stock Exchange, this market is open to foreign investors. The instruments that can be traded on the exchange through TWSE brokers include stocks, bonds (government and corporate), ETFs, options, futures, call/put warrants and Taiwan Depository Receipts (TDRs).

It is one of two main stock exchanges in Taiwan – the other being the Taipei Exchange (TPEx), with ROCO as its market identifier code (MIC). When comparing the TWSE vs TPEx, the former is generally home to larger companies, while the TPEx offers a capital-raising market for companies that may not meet the listing requirements of the TWSE. There is also the GreTai Securities Market in Taiwan, which generally focuses on small-cap and faster-growing stocks.

As of 2022, there were 966 listed companies on the Taiwan Stock Exchange, with the majority being domestic companies, although foreign stocks are present too. However, Taiwan Stock Exchange brokers will not necessarily offer all of these.

The listed companies cover a wide range of sectors, including technology, finance and manufacturing. Although Taiwan has a strong manufacturing sector, for example in semiconductor production, it is a diversified economy in which many investors see significant potential in the face of regional geopolitical uncertainty.

History

Although the Taiwan Stock Exchange was technically established in 1961, operations did not begin until the year after. This makes the exchange relatively young compared to some other global alternatives like the London Stock Exchange. It was only a short time before the physical trading floor started moving into the shadows to be replaced by a fully automated system in 1993.

In 2020, the TWSE moved from a frequent batch auction system to continuous matching, which many claim has helped tightened spreads and increased investing volume at Taiwan Stock Exchange brokers.

It is said that trading volume doubled from $4 billion to $8 billion. Despite some of this no doubt resulting from the pandemic and other factors, this is still a large increase compared with that of the Hong Kong Stock Exchange.

Eligibility

There are two types of listings on the Taiwan Stock Exchange – primary and secondary listings. A primary listing is typically for companies based in Taiwan or with significant operations on the island. A secondary listing is designed for foreign companies already listed on another stock exchange elsewhere that are looking for new opportunities to raise capital.

The eligibility requirements for primary listings are generally higher. This is because companies seeking a secondary listing will usually have already been through checks to be listed on their primary exchange. Rules are also more relaxed for listings on the Taiwan Innovation Board (generally less common at Taiwan Stock Exchange brokers) compared to the Main Board.

The TWSE usually does not discriminate against companies based on the jurisdiction they operate in, apart from Chinese-incorporated companies, which cannot be listed. Non-tech primary listing companies should have at least NT$600m of paid-in capital or shareholder equity. Their market cap must also be at least NT$1.6 billion.

If the company is a non-state-owned domestic enterprise, paid-in capital must be at least NT$600m and at least 30 million public shares must be offered. Tech companies have slightly lower requirements concerning market cap and paid-in capital/shareholder equity. Other criteria are available to allow some companies that are not yet profitable to be listed, creating a more diverse range of stocks at Taiwan Stock Exchange brokers.

Investors should be aware that the eligibility criteria do not just focus on financial considerations; corporate governance, the soundness of the business plan and the need to meet disclosure requirements are also taken into account. Some companies join the Taiwan OTC Exchange (TWO), which can be a step towards a TWSE listing.

New companies must also prepare a prospectus for investors as part of their listing application.

Regulation

The main regulatory body on the exchange is the Financial Supervisory Commission of the Republic of China (FSC). Its focus is on improving the operation of institutions, maintaining economic stability and promoting the development of the financial markets.

Multiple agencies operate under the FSC:

• Banking Bureau
• Insurance Bureau
• Financial Examination Bureau
• Securities and Futures Bureau

The financial markets generally fall within the remit of the Securities and Futures Bureau.

Rules can also be imposed by the Ministry of Economic Affairs of the Republic of China and relevant legislation includes the Securities and Exchange Act and the Company Act, which applies to companies incorporated in Taiwan and foreign companies operating in Taiwan. Also of relevance is the Principles for Financial Market Infrastructures (PFMI).

Markets

The two main markets on the Taiwan Stock Exchange are the Main Board and the Taiwan Innovation Board (TIB).

The Main Board is the more established and traditional market on the exchange, home to the largest companies. The TIB only launched in July 2021, so is a relatively new addition but an effective way for innovative start-up companies to access capital.

In terms of instruments, the assets at TWSE brokers can be split into the securities market, derivatives market and bond market. The securities market is the main equity market for small, mid and large-cap stocks and shares.

The derivatives market is operated by the Taiwan Futures Exchange (TAIFEX), a subsidiary of the TWSE, and includes stock index futures, equity options and single stock futures.

The bond market is home to fixed-income securities and has multiple sub-markets, including the Corporate Bond Market and the Government Bond Market.

Biggest Players

As the main index on the TWSE is a weighted index, it is important to know the rankings and who the largest companies are at Taiwan Stock Exchange brokers – the movement in their stock prices will impact the exchange the most.

Below is a list of the top five companies by market cap:

1. Taiwan Semiconductor Manufacturing (TSM) Company Limited – NT$13.6tn
2. Hon Hai Precision Industry – NT$1.4tn
3. MediaTek – NT$1.2tn
4. Chunghwa Telecom – NT$927.0bn
5. Formosa Petrochemical – NT$803.0bn

Other companies that may be listed at some TWSE brokers include Yang Ming Marine Transport Corporation, Yageo Corporation, Foxconn Technology Co. Ltd, HTC Corporation and Qisda Corporation.

Popular ETFs that trade on the exchange are the Yuanta/P-shares Taiwan Top 50 ETF (code 0050) and the Yuanta/P-Shares Taiwan Dividend Plus ETF (code 0056).

Other companies (and their associated symbols/tickers) can be found on the official TWSE website in the Market Observation Post System (MOPS).

Indices

TWSE Capitalization Weighted Stock Index (TAIEX)

The TAIEX is the Taiwan Stock Exchange’s main index. It was first published in 1967 with its base year being 1966. The TAIEX measures the aggregate performance of all common stocks on the TWSE, with some exceptions. For example, some newly-listed companies cannot join until their second trading month.

The fact that it includes such a broad range of stocks makes it a good indicator of its overall performance and is a common index offered by Taiwan Stock Exchange brokers.

As the name suggests, it is a market capitalisation-weighted index, meaning that companies with a higher market cap will impact the index more than smaller ones. Prices are calculated every five seconds.

The TAIEX is split into a Price Index (based on the share prices of its constituents) and the Total Return Index (which also includes dividends in the returns calculation). For example, Shanghai Commercial & Savings Bank Ltd (code 5876) has a dividend yield of 3.77% and these would be taken into account.

Between 2019 and 2021, the index had three consecutive years of growth of over 20%, before tumbling 22.4% in 2022. Traders should keep this volatility in mind when investing in it through TWSE brokers.

Taiwan 50 Index

This index is more concentrated, with its constituents being the 50 largest stocks on the Taiwan Stock Exchange. This makes it a good indicator of the performance of larger and more established blue-chip companies.

However, it also means the index is less diversified than the TAIEX as it tracks fewer companies.

Taiwan Mid-Cap 100 Index

The Taiwan Mid-Cap 100 Index tracks the largest 100 companies by market cap that are not on the Taiwan 50 Index. This results in mid-cap companies being included and the index is a good indicator of growth sector performance.

It is generally not as common an index as the TAIEX at Taiwan Stock Exchange brokers.

Taiwan Technology Index

IT and technology are a major part of the Taiwanese economy and there is an index that has been designed to track the sector. All IT stocks from the Taiwan 50 Index and the Taiwan Mid-Cap 100 Index are incorporated.

This index includes more than 40% of the overall market, which shows the strength of the IT and technology sector in Taiwan.

Other Indices

Although many TWSE brokers will not offer instruments that track the following indices, they can still be useful indicators that feed into fundamental analysis.

• Taiwan Shariah Index
• Taiwan Dividend+ Index
• RAFI Taiwan Index Series
• Taiwan Eight Industries Index

Taiwan Index Chart

How To Buy Stocks On The Taiwan Stock Exchange

Identify A Strategy

The first step after choosing a Taiwan Stock Exchange broker is to think about strategy. Day traders and swing traders will typically focus on technical analysis, where charts and indicators are examined closely for repeatable statistical patterns. Some stocks are better suited for a day trading list than for long-term investing.

Technical analysis traders following a particular stock on the TWSE may implement a moving average crossover strategy, whereby a long position is opened when a short-term simple moving average crosses above a longer-term one. This could indicate that a bearish trend is ending and the market may be becoming more bullish.

On the other hand, long-term investors will often rely more on fundamental analysis. Economic and political changes in mainland China can heavily impact the Taiwan stock market, so it is important to keep an eye on relevant news.

Interest rate decisions of major central banks across the world can also send strong signals to the market as these decisions may impact economic growth and inflation. In addition, as many TWSE companies do business around the world, the strength of the TWD and RMB currencies can be important to consider.

If following particular companies, look out for when their earnings reports will be released. These can provide insight into the financial health of the company, as can other official filings and quantitative disclosures. The p/e ratio and forward p/e ratio can be useful (but not perfect) measures of whether a company’s stock is overvalued or undervalued relative to its earnings and future earnings. Some investors may use these ratios to set a price limit, not opening a position if the asset’s value is above it.

TWSE brokers will often provide relevant information on companies through their trading platforms.

Choose An Instrument

The instrument used to trade through Taiwan Stock Exchange brokers will often be dictated by the strategy chosen. CFDs are often better suited to short-term strategies, whereas direct share dealing may be the preferred choice for long-term investors.

There are other factors to consider when choosing a trading mechanism. For example, CFDs are usually leveraged instruments and are therefore suited to those with higher risk tolerance. In general, derivatives track the underlying asset but do not transfer ownership.

ETFs will typically contain a basket of Taiwan Stock Exchange stocks, making them a relatively cost-effective way to achieve increased diversification within the bounds of the stock exchange.

Open Position

Most Taiwan Stock Exchange brokers make it relatively easy to carry out a TWSE-listed company search and identify a particular asset. Listed stocks and ETFs also have codes to avoid any confusion.

Some short-term traders may wish to open a position ahead of an important announcement that could influence the TWSE. Although this can earn larger profits in a shorter amount of time, it is a riskier approach as the market can be volatile before and after key announcements and press releases.

Other investors will simply open a position when the price reaches a certain predicted level, often automatically.

Some TWSE brokers may also provide copy trading services, which allow investors to take a more passive approach, where the decisions of another trader are followed. A fee is usually charged for this service.

Close Position

Trading platforms like MetaTrader 4 and MetaTrader 5 have stop limits and other order types that can automatically close positions with Taiwan Stock Exchange brokers when the price reaches a particular level, rather than having to constantly monitor the market.

Investors may close positions for various reasons, a trend may be showing signs of reversing or a Taiwanese company’s long-term growth projections could have been downgraded.

Some trading platforms may also facilitate a simple entity search followed by one-click closing of the position.

Trading Hours

The opening hours of the Taiwan Stock Exchange are 09:00-13:25 (GMT+8), Monday-Friday, so there is no Saturday or Sunday investing on the market. The exchange is therefore only open for 4 hours 25 minutes a day, making it a relatively short trading session at TWSE brokers.

However, there is a pre-trading session from 08:30-09:00 (GMT+8) and the opening times of the post-trading session are 14:00-14:30 (GMT+8). There is no lunch break but abnormal events can cause a trading halt.

There are also around 20 trading holidays when the TWSE is closed, including public holidays like Chinese New Year, Labour Day and National Day. Check a trading calendar so you can plan ahead.

Bottom Line On The Taiwan Stock Exchange

Although Taiwan Stock Exchange brokers may not be as readily available as those offering the LSE or NYSE, traders can still access this diversified market, typically by investing in individual stocks or the TAIEX. The significant recent growth of the Taiwanese economy has opened up many opportunities on its main exchange, though investors should remain aware of the geopolitical risks associated with the country.

See our table of top-rated brokers with access to the Taiwan Stock Exchange to get started.

FAQ

Article Sources

Taiwan Stock Exchange website

IG Index TAIEX trading conditions