Published On: Sat, Feb 15th, 2014

Low Volatility and High Dividends Make for TWSE and S&P DJI New Collaborative Index

Lee Sush-Der, Chairman Taiwan Stock Exchange

Lee Sush-Der, Chairman Taiwan Stock Exchange

In 2013, the TWSE Capitalization Weighted Stock Index rose by 11.85%, making it second only to Japan (which was affected considerably by quantitative easing) among Asia’s ten major stock markets and greatly surpassing Hong Kong, which came in third. Following the world financial crisis, the European sovereign debt crisis, the recent issues of QE’s early exit, and Euro deflation fears, uncertainty still remains high throughout the global economy. Investors, both individuals and legal entities alike, are now seeking low risk investments that can provide stable returns. On January 27, TWSE and the world’s leading provider of financial indices, S&P Dow Jones Indices LLC (S&PDJI), have launched their first collaborative index: the S&P/TWSE Taiwan Low Volatility High Dividend Index. This index will serve as a basis for indexed investments that manage risk while retaining high yields, bringing investors the advantages of low volatility and high-yielding dividends.

The S&P/TWSE Taiwan Low Volatility High Dividend Index will comprise 40 high-yielding companies within the S&P Taiwan BMI. Selected stocks must be listed on the Taiwan Stock Exchange (GSTM stocks are not eligible) and have a 3-month average daily traded value above 100 million TWD. In addition, stocks must have been issued and trading at least one year before the rebalancing date and must also have provided non-zero dividends during the past 12 months. The base date is set at October 31, 2003, and index constituents will be weighted in accordance to dividend yields over the past 12 months. The index will be re-weighted semi-annually to reflect current market conditions.

Last month, S&P Dow Jones Indices launched the S&P Total Greater China BMI, which includes the S&P Total China BMI, S&P Hong Kong BMI, and S&P Taiwan BMI. This index greatly benefits international investors in efficiently obtaining market information regarding the Greater China Region. The S&P/TWSE Taiwan Low Volatility High Dividend Index is the latest addition to S&P Dow Jones Indices’ line-up of Greater China products.

From a historical perspective, low-volatility, high-dividend stocks offer the benefits of reducing risk while retaining high long-term returns. They are able to effectively hedge against adverse conditions, such as stock market bubbles, and provide above-average returns in the long run. Of the eligible stocks in the S&P/TWSE Taiwan Low Volatility High Dividend Index, the top forty stocks with the highest dividend yields and lowest realized volatility are selected, effectively controlling risk and ensuring substantial returns.

The S&P/TWSE Taiwan Low Volatility High Dividend Index is ideal for investors with an interest in Taiwan’s stock market and who hope to strike an attractive balance between return and volatility amid both fluctuating and stable market conditions.

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