With a newly elected government Taiwan is set to reopen a gateway of opportunity. President Ma Ying-jeou, who takes leadership on May 20th, has set forth ambitious plans to raise the growth rate and ramp up employment.

In addition Mr. Ma is helping to ease tensions with China. Some of the changes are already being seen. Direct flights will be allowed between China and Taiwan which will stimulate tourism and business.

And Taiwan companies will have a jump start at rebuilding their investments in China.

Up to this point there has been a 40% investment ceiling but this is set to change. The new government is taking steps to remove this and banks too may also be allowed to take a 20% stake in Chinese lenders.

The iShares MSCI Taiwan Index Fund (EWT: NYSE) is composed of a basket of stocks in the industrial sectors, material, telecomm and information technology. The semiconductor sector makes up close to 50% of the index and most of this manufacturing takes place in China.

EWT is an indirect and cheap way to play the China growth story. It has lagged behind most of the other Asian ETFs over a five-year period and is now ready to move higher as it catches up with the rest of Asia.

Sally Limantour

Editor, Taipan

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