TAIFEX Introduces Futures on Critical Semiconductor and Shipping Benchmarks

The spread of Omicron and the new variants in countries central to supply chains in parts of Asia and the world has been adding fuel to the pandemic’s lingering after-effects, including global inflation, supply chain gridlocks, port congestion, and the shortage of essential products such as semiconductors.  

Yet in contrast to its neighborhood countries, Taiwan’s export-led economy grew a robust 3.06% in the first quarter of 2022, buttressed by the crucial position that the island’s semiconductor fabs hold within the global technology value chain, while promoting the development of one of the world’s largest and most valuable shipping and transportation sectors.

Taiwan’s Semiconductor Industry Stands Out in Growth and Resilience

Taiwan accounts for over 60% of the chip foundry market in the world and produces 92% of the planet’s most advanced semiconductors. The island not only plays a pivotal role in many high-tech industries, but is also of substantial and strategic importance to U.S. semiconductor strength. Led by world-leading foundries and chipmakers including Taiwan Semiconductor Manufacturing Co. (TSMC), MediaTek Inc. (MTK), and United Microelectronics Co. (UMC), Taiwan’s semiconductors ecosystem, which consists of wafer foundries, testing, and packaging, among others, is currently the unrivaled worldwide leader in production value. 

As demand continues to surge amid a global chip shortage, the production value grew 25.9% in 2021 to a record NT$4.1 trillion (US$147 billion), despite pushes from the U.S. and EU to revitalize their semiconductor industries. Output is expected to continue to expand in 2022, driven by demand for specialized advanced and the highest-end chips.

The Shipping and Transportation Sector Also Continues to Boom

The post-pandemic surge in demand also benefited Taiwan’s maritime sector, a key player in the world’s container-shipping industry.

According to shipping information provider Alphaliner’s latest capacity figures released in May, three Taiwanese ocean shippers are in the top tier of the globe, with Evergreen Marine Corporation ranking the sixth, Yang Ming Marine Transport Corporation the ninth, and Wan Hai Lines coming in at the 11th. These three listed Taiwanese companies own a total of 442 container vessels, collectively accounting for over one-tenth of worldwide capacity.

In recent years, these industry champions have benefited strongly from the realignment of inter-regional routes and soaring rates for long-haul freight routes, resulting in a deluge in profits with investors being rewarded with both capital gains and dividend yields. 

New Sector Futures for Capturing Trading Opportunities

Following continuous demands, on June 27, 2022, the Taiwan Futures Exchange (TAIFEX) will introduce two thematic products – Taiwan Semiconductor 30 Futures (SOF) and Shipping and Transportation Sector Futures (SHF), to help traders more precisely manage risks and navigate uncertainty in a fast-changing external environment, while also offering more trading alternatives for other market participants.

The SOF tracks the TIP Taiwan Semiconductor Total Market Select 30 Index, which comprises the top 30 semiconductor companies listed on the Taiwan Stock Exchange and the Taipei Exchange ranked by market capitalization – allowing investors to manage their exposure to this globally-critical industry and capture new opportunities at the same time. In addition to regular trading session, SOF is also available for overnight trading to facilitate traders’ timely risk management actions during the US market hours, considering many of the index’s major components are listed as American Depositary Receipts.

Meanwhile, SHF’s underlying index – the TAIEX Shipping and Transportation Sub-Index, is comprised of industry heavyweights including Eva Airways, China Airlines, and Taiwan High Speed Rail, alongside the aforementioned three major ocean shippers of Taiwan, and benchmarks the overall performance of the country’s shipping and transportation stocks. The roll-out of SHF will help market participants to gain exposure to this pivotal sector.

Future uncertainties have generated trading opportunities between sectors and against major index benchmarks, while traders’ divergent views suggest that the market will continue to see more rotation between sectors in the post-pandemic era. SOF and SHF will enable traders to implement multi-sector trading strategies and provide effective tools to manage sector exposure.