iShares Inc iShares MSCI Taiwan (EWT) analysis, July 1, 2026

Key Updates

EWT has retraced 3.54% from the $112.60 peak recorded in the June 22 report, settling at $108.61 as of July 1, 2026. This pullback follows a parabolic YTD advance of 70.96% and represents the first meaningful consolidation after three consecutive breakout sequences. Despite the near-term softness, the broader fundamental backdrop — anchored by Taiwan's upgraded 2026 GDP growth forecast of 9.64% and record AI-driven semiconductor demand — remains firmly intact. The investment thesis has not materially changed; the pullback is consistent with normal price discovery following an extended rally rather than a structural deterioration.

Current Trend

EWT's YTD performance of +70.96% places it among the strongest-performing country ETFs globally, reflecting the extraordinary re-rating of Taiwan's equity market driven by AI infrastructure demand. Key trend observations:

• The 1-day (+2.67%) and 5-day (+3.20%) gains suggest the pullback from $112.60 may be finding near-term support around current levels (~$108–$109).
• The 1-month gain of +5.67% confirms the medium-term uptrend remains constructive despite the -3.54% retracement since the last report.
• The 6-month gain of +70.48% underscores the structural nature of the re-rating, not a tactical swing.
• Taiwan's Taiex index has surged over 50% YTD, with Taiwan's market capitalization rising from ninth- to sixth-largest globally, approaching India's $4.92 trillion as of late May 2026.

Investment Thesis

EWT offers concentrated exposure to Taiwan's technology ecosystem, which has emerged as the indispensable backbone of global AI infrastructure buildout. The thesis rests on three pillars: (1) Taiwan's unrivaled position in the global semiconductor value chain — spanning chip design, DRAM, ASIC manufacturing, power management, and AI server systems; (2) a macro tailwind from Taiwan's 9.64% GDP growth forecast for 2026, the highest since 1981 in Q1 at 14.55% quarterly expansion; and (3) sustained foreign capital inflows of approximately $25 billion in 2026, signaling institutional conviction in the structural re-rating of Taiwanese equities. TWSE data showing AI supply-chain companies representing over 40% of new listing applications in 2026 further validates the depth of the ecosystem.

Thesis Status

The investment thesis remains intact and well-supported by the latest data. The -3.54% pullback from $112.60 does not alter the structural case. Key thesis elements are tracking ahead of expectations:

• Taiwan's 2026 GDP growth forecast was revised upward to 9.64% from 7.71%, and export growth was raised to 39.77% — the highest since 1976 — confirming the AI demand cycle is accelerating, not plateauing.
• TSMC reported $18.2 billion in Q1 earnings, more than double two years prior, providing fundamental validation for the equity re-rating.
• The combined wealth of Taiwan's 50 richest surging 56% to a record $308 billion reflects broad-based gains across the technology value chain, not just a single-stock phenomenon.
• The primary risk to the thesis — that valuations have run ahead of fundamentals — is partially mitigated by analyst commentary noting Korean and Taiwanese semiconductor stocks still trade at lower forward P/E ratios than U.S. counterparts despite superior earnings growth.

Key Drivers

The following catalysts are currently driving EWT's performance and near-term price action:

• AI Infrastructure Demand Cycle: Taiwan's export growth forecast raised to 39.77% for 2026 — the highest since 1976 — directly tied to AI infrastructure buildout. TSMC's Q1 earnings of $18.2 billion, more than double two years prior, anchor the fundamental case. (Bloomberg)
• COMPUTEX 2026 Ecosystem Validation: TWSE highlighted Taiwan's complete AI value chain at COMPUTEX 2026, with AI supply-chain businesses representing over 40% of new TWSE listing applications — up from 33% in 2025 and 29% in 2024. (PR Newswire)
• Global Market Cap Re-Ranking: Taiwan's market capitalization reached $4.89 trillion, closing in on India's $4.92 trillion and rising from ninth- to sixth-largest globally, attracting ~$25 billion in foreign inflows YTD. (Reuters)
• Institutional Identification as "Next Big Wave": Goldman Sachs Asset Management's chief investment strategist identified Taiwan as undervalued relative to U.S. AI stocks despite its critical infrastructure role, with EWT returning ~67% YTD through early June. (CNBC)
• Domestic Wealth Management Competitive Dynamics: Foreign ETF providers including iShares are experiencing net outflows in Taiwan's ~$300 billion domestic wealth management market as local providers capture inflows, representing a structural headwind for EWT's fee competitiveness in-market. (Bloomberg)

Technical Analysis

EWT is consolidating after establishing what appears to be a near-term high at $112.60 (June 22 report). Key technical observations:

• Current price: $108.61, representing a -3.54% retracement from the $112.60 peak.
• Near-term support: The $108–$109 zone, which coincides with the prior breakout level from the June 18 report ($109.21), is now acting as a potential support floor. The 1-day and 5-day gains (+2.67% and +3.20%) suggest buyers are defending this zone.
• Resistance: $112.60 represents the most recent high and primary overhead resistance. A reclaim of this level would reinstate the breakout sequence.
• Trend structure: The YTD advance of +70.96% and 6-month gain of +70.48% indicate a sustained, structurally driven uptrend. The current pullback is shallow relative to the magnitude of the prior advance, consistent with healthy consolidation rather than trend reversal.
• Concentration risk note: As observed in the Korean market context, extreme index concentration in a handful of names (TSMC and MediaTek accounting for outsized index weight) means single-stock volatility can disproportionately impact EWT's price action.

Bull Case

• 1. Unprecedented GDP and Export Growth Upgrade: Taiwan's 2026 GDP growth forecast was raised to 9.64% (from 7.71%), with export growth projected at 39.77% — the highest since 1976. Q1 2026 GDP expanded 14.55%, the fastest pace since 1981. These macro metrics provide the strongest fundamental underpinning for continued equity re-rating. (Bloomberg)
• 2. TSMC Earnings Power Validates Valuation: TSMC reported Q1 earnings of $18.2 billion — more than double the figure from two years prior — and Taiwanese tech firms completed $14.5 billion in debt deals in 2026, demonstrating robust capital market activity and fundamental earnings support for elevated index levels. (Bloomberg)
• 3. Relative Valuation Discount to U.S. AI Peers: Goldman Sachs Asset Management identifies Taiwan as undervalued relative to U.S. AI stocks despite its critical infrastructure role. Korean and Taiwanese semiconductor stocks trade at lower forward P/E ratios than U.S. counterparts despite superior earnings growth, suggesting further re-rating potential. (CNBC) (Morningstar)
• 4. Deepening AI Ecosystem and Pipeline: AI supply-chain companies represent over 40% of new TWSE listing applications in 2026 (up from 33% in 2025 and 29% in 2024), signaling accelerating ecosystem depth and sustained capital formation in the AI value chain. Taiwan's complete, resilient value chain — from chip design to thermal solutions and AI servers — is structurally difficult to replicate. (PR Newswire)
• 5. Sustained Foreign Institutional Inflows: Taiwan attracted approximately $25 billion in foreign portfolio inflows in 2026 YTD, contrasting sharply with India's $24.18 billion in outflows. This institutional conviction is reflected in Taiwan's market cap rising to $4.89 trillion, approaching India for the fifth-largest equity market globally. (Reuters)

Bear Case

• 1. Extreme Concentration Risk and Dot-Com Parallels: Taiwan's market gains are heavily concentrated in TSMC (+44–50% YTD) and MediaTek (+200% YTD). Analysts explicitly note "concerning parallels to the 1999 dot-com bubble," with the average stock in comparable markets declining even as headline indices surge — a classic sign of unsustainable concentration. (Morningstar)
• 2. Valuation Risk After 70%+ YTD Advance: EWT's 70.96% YTD gain and the Taiex's doubling to $4.4 trillion in market cap represent a rapid, potentially unsustainable re-rating. The minimum wealth threshold to qualify for Taiwan's richest list surged to $2.2 billion from $1.3 billion — a 69% increase — reflecting the degree of wealth concentration and potential for mean reversion. (Forbes)
• 3. Geopolitical Risk Remains Unresolved: The Bloomberg report on Taiwan's growth outlook explicitly references geopolitical tensions and Taiwan's heavy energy import dependence as ongoing risks. Geopolitical disruption — particularly given Taiwan's critical role in global semiconductor supply — could rapidly reverse foreign inflows and compress valuations. (Bloomberg)
• 4. Domestic Market Structural Headwinds for Foreign ETFs: Wall Street firms including iShares are experiencing net ETF outflows in Taiwan's ~$300 billion domestic wealth management market as local competitors with structural advantages — brand recognition, regulatory familiarity, and distribution networks — capture inflows. This could constrain EWT's AUM growth and create flow-driven price pressure. (Bloomberg)
• 5. Energy Import Vulnerability and External Shock Risk: Taiwan's heavy reliance on energy imports, cited in the Bloomberg growth outlook report, creates vulnerability to global commodity price shocks. Oil price volatility — referenced alongside geopolitical tensions — could compress corporate margins and dampen the economic growth trajectory underpinning the current equity premium. (Bloomberg)