iShares Inc iShares MSCI Taiwan (EWT)

Executive Summary

EWT declined 2.03% to $71.44 since the February 11th report, surrendering gains from the prior session's advance to $72.92. The pullback occurred despite overwhelmingly positive fundamental developments, including Taiwan's upgraded GDP forecast to 7.71% and finalization of the US-Taiwan trade deal that reduces tariffs from 36% to 12%. The investment thesis remains intact and strengthened, with the temporary weakness representing technical consolidation following the recent rally rather than fundamental deterioration.

Key Updates

EWT has retraced 2.03% from $72.92 to $71.44, moving from a new high established on February 11th. Despite this decline, the ETF maintains a strong 12.45% YTD gain and remains 18.24% above the six-month low. The pullback follows eight significant news developments, most notably Taiwan's statistics bureau raising its 2026 GDP growth forecast to 7.71% from 3.54%—a remarkable 118% upgrade driven by sustained AI demand and the finalized US-Taiwan trade agreement. The trade deal reduces average tariffs on Taiwanese exports from 36% to 12%, with Taiwan committing to $84.8 billion in US goods purchases and $500 billion in investment commitments through 2029. TSMC reported 37% revenue growth in January, while Taiwan's export growth projection was raised to 22.22% from 6.32%, supported by January's 70% surge in shipments—the fastest pace in 16 years.

Current Trend

EWT demonstrates strong upward momentum despite today's 2.20% decline. The ETF has gained 12.45% YTD through February 17th, significantly outperforming broader emerging market indices. The recent price action shows a pattern of consolidation following the rally to $72.92, with the current level of $71.44 representing a minor retracement from the new high. Support has been established around the $70-71 range, tested during the early February pullback to $67.60. The 1-month gain of 6.09% and 6-month advance of 18.24% confirm the sustained uptrend. The Taiex benchmark has risen 16% YTD to record highs, extending a three-year streak of at least 25% annual gains, providing strong underlying support for EWT's performance.

Investment Thesis

The investment thesis for EWT centers on Taiwan's dominant position in the global AI semiconductor supply chain, particularly through TSMC's market leadership in advanced chip manufacturing. Taiwan's economy has become the primary beneficiary of the AI infrastructure buildout, with tech hardware exports driving unprecedented GDP growth. The recently finalized US-Taiwan trade agreement provides structural support through reduced tariff barriers and massive investment commitments, while eliminating a significant policy uncertainty. Taiwan's weighting in the MSCI Emerging Markets Index has surpassed China at 21.06%, reflecting investor recognition of Taiwan's strategic importance in AI and semiconductor manufacturing. The concentration of wealth creation in the semiconductor sector, combined with TSMC's capital spending plans of up to $56 billion in 2026, positions Taiwan for continued outperformance as long as global AI demand remains robust.

Thesis Status

The investment thesis has materially strengthened since the last report. Taiwan's statistics bureau raising its 2026 GDP forecast to 7.71%—more than double the previous 3.54% projection—validates the sustained nature of AI-driven demand beyond initial expectations. The finalized US-Taiwan trade deal eliminates the primary geopolitical risk that weighed on valuations, reducing tariffs from 36% to 12% and securing market access through 2029. TSMC's 37% revenue growth in January and commitment to increased 2026 spending confirms the AI infrastructure cycle continues to accelerate rather than moderate. Bank of America's decision to nearly double its Taiwan GDP forecast to 8% from 4.5%, citing "relentless" AI demand, represents a significant upgrade from major financial institutions. The thesis faces no material challenges from the provided data, with all fundamental developments supporting the core narrative of Taiwan's central role in AI semiconductor production.

Key Drivers

Taiwan's economic trajectory has been dramatically upgraded, with the statistics bureau raising its 2026 GDP growth forecast to 7.71% from 3.54%, driven by sustained AI demand and the newly finalized trade agreement with the US. The US-Taiwan trade deal reduces average tariffs on Taiwanese exports from 36% to 12%, while Taiwan commits to $84.8 billion in US goods purchases and $500 billion in investment commitments through 2029. TSMC continues to drive growth with 37% revenue growth in January and plans for increased capital spending in 2026. Taiwan's export growth projection was raised to 22.22% from 6.32%, supported by January's 70% surge in shipments, the fastest pace in 16 years. Bank of America nearly doubled its Taiwan GDP forecast to 8% from 4.5%, citing relentless global demand for Taiwanese tech hardware. Taiwan has surpassed China to become the largest component of the MSCI Emerging Markets Index at 21.06%, reflecting the growing importance of Taiwan's chipmaking sector in global technology markets.

Technical Analysis

EWT is experiencing a minor technical pullback following the establishment of a new high at $72.92 on February 11th. The current price of $71.44 represents a 2.03% retracement, which remains well above the early February support level of $67.60. The ETF has maintained a strong upward trajectory with support established in the $70-71 range. The 5-day performance of +0.96% indicates consolidation rather than trend reversal, while the 1-month gain of 6.09% and 6-month advance of 18.24% confirm the dominant uptrend. The YTD gain of 12.45% significantly outpaces broader emerging market indices. Key resistance now sits at the recent high of $72.92, while support has been tested and confirmed around $70-71. The price action suggests healthy consolidation following rapid gains, with no technical indicators signaling trend exhaustion. Volume patterns during the recent rally, as evidenced by the 15-week streak of $42.8 billion in EM ETF inflows, support continued institutional accumulation.

Bull Case

• Taiwan's GDP growth forecast upgraded to 7.71% from 3.54%, with export growth raised to 22.22% from 6.32% - The statistics bureau's dramatic upward revision reflects sustained AI demand exceeding initial expectations, with January shipments surging 70%, the fastest pace in 16 years, providing structural support for continued economic outperformance. Source
• US-Taiwan trade deal reduces tariffs from 36% to 12% and includes $500 billion in investment commitments through 2029 - The finalized agreement eliminates a major policy uncertainty while securing market access and reducing costs for Taiwanese exporters, with Taiwan committing to $84.8 billion in US goods purchases, creating a stable framework for continued growth. Source
• TSMC reported 37% revenue growth in January and plans capital spending of up to $56 billion in 2026 - The company's accelerating revenue growth and increased capital expenditure commitment demonstrate the AI infrastructure cycle continues to intensify, with major tech companies expanding AI investments, supporting Taiwan's semiconductor ecosystem. Source
• Taiwan surpassed China to become the largest component of the MSCI Emerging Markets Index at 21.06% - This milestone reflects investor recognition of Taiwan's strategic importance in AI and semiconductor manufacturing, driving structural inflows as passive funds rebalance and active managers increase allocations to capture the AI theme. Source
• Bank of America nearly doubled Taiwan GDP forecast to 8% from 4.5%, citing "relentless" AI demand - Major financial institutions are upgrading Taiwan growth projections above the central bank's 3.67% forecast, with Goldman Sachs projecting 5.1%, indicating consensus recognition of sustained AI-driven growth beyond initial expectations. Source

Bear Case

• Taiwan's economy heavily concentrated in semiconductors, with electronics contributing 6.2 percentage points to 7.31% GDP growth - The extreme concentration creates vulnerability to any slowdown in AI demand or semiconductor cycle downturn, with household consumption adding only 0.7 percentage points last year, indicating limited economic diversification and high dependence on tech sector performance. Source
• Trump administration pushing TSMC to relocate 40% of production to US, threatening nearly a fifth of Taiwan's corporate tax revenue - The pressure to shift manufacturing capacity to the US poses structural risks to Taiwan's economic model and tax base that funds defense and social programs, potentially reducing Taiwan's competitive advantages in semiconductor manufacturing. Source
• US trade deficit with Taiwan expanded to $126.9 billion in first 11 months of 2025 from $73.7 billion for all of 2024 - The 72% increase in the trade deficit, driven primarily by high-end AI chip imports, creates political pressure for further policy actions despite the trade deal, potentially leading to additional restrictions or demands for manufacturing relocation. Source
• Investors hedging China and tech risks with significant put purchases in China ETFs and semiconductor stocks - Market participants are positioning for escalating US-China tensions following China's criticism of the US-Taiwan trade deal, with approximately 400,000 March-expiring puts purchased in China-focused ETFs, indicating concerns about geopolitical spillover risks. Source
• Chinese tech stocks experienced significant declines with Tencent falling 9.5% and chip makers losing 10-15% - The selloff in Chinese technology stocks following US tech weakness demonstrates regional contagion risk, with sentiment spillover potentially affecting Taiwan's tech sector despite different fundamental drivers, particularly if broader risk-off sentiment emerges. Source