FTSE Russell's indices representing the Taiwan equity market include the uncapped FTSE Taiwan Index, designed to represent large- and mid-cap stocks and its capped counterpart, the FTSE Taiwan RIC Capped Index.
What our research means for investors
We elaborate on the lower volatility and better industry diversification features of the FTSE Taiwan RIC Capped Index, that allow it to be more defensive during volatile macroeconomic periods.
Points of differentiation:
- The constituents of the FTSE Taiwan RIC Capped Index are capped quarterly so that no more than 20% of the index’s weight will be allocated to a single constituent and the sum of the weights of all constituents representing more than 4.5% of the index will not exceed 48% of the total index weight
- The index demonstrates a strong defensive nature with its significantly better industry diversifications and lower volatility vs. the uncapped FTSE Taiwan Index
Key takeaways:
- As of the end of January 2024, Taiwan Semiconductor Manufacturing Company (TSMC) alone accounted for over 40% of the uncapped FTSE Taiwan Index, while it accounted for only 21% in the FTSE Taiwan RIC Capped Index
- The capping methodology in the FTSE Taiwan RIC Capped Index adds a crucial diversification benefit to the index composition
- The index has historically displayed lower annualised volatility than the FTSE Taiwan Index over different economic cycles
