Taipei--An Exchange Traded Fund (ETF) that was listed on the local main board late last year to track the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), posted significant gains in the last week of December, according to the Taiwan Stock Exchange (TWSE).
The TWSE, which operates the local main board, said that the Fubon S&P 500 VIX Short-Term Futures ETF, issued by Fubon Asset Management Co. (????), rose 22.73 percent during the week at a time when the global financial market encountered volatility.
The Fubon S&P 500 VIX Short-Term Futures ETF, which uses the S&P 500 VIX Short-Term Futures Index Excess Return as its underlying index and takes advantage of a volatile market, is the first ETF listed on the local main board to track the VIX index.
The VIX is widely considered an ideal gauge of fear in the market. The S&P 500 VIX Short-Term Futures Index Excess Return is compiled and maintained by S&P Dow Jones Indices.
The TWSE said that since the Fubon S&P 500 VIX Short-Term Futures ETF provides investors here with a good option to hedge market risks, the fund has witnessed its popularity rising in the local market.
The TWSE said that the size of the fund totaled about NT$600 million (US$19.17 million) as of Jan. 20, with the average daily turnover hitting 3.6 million shares.
Yang Pang-heng (???), manager of the Fubon S&P 500 VIX Short-Term Futures ETF, said that right before and after the release of the monthly non-farm payroll data in the United States, the VIX index tended to turn volatile, since the job reports serve as one of the important indicators to whether and how the U.S. Federal Reserve will adjust its monetary policy.
Yang cited market statistics compiled in the past three years as saying that when investors bought into equities tracking the VIX index on the day of the non-farm payroll data release and sold their holdings five days after the data release, their investment returns were largely in positive territory.
The data compiled during the 2014-2016 period shows that in the investment returns of the 36 equity purchases tracking the VIX on the day of the job data due and sales five days after the data release, 19 purchases posted returns of more than 50 percent, Yang said. In the past three years, the aggregate investment returns of the 36 purchases hit 80.2 percent, he added.
The TWSE said that the Fubon S&P 500 VIX Short-Term Futures ETF is a good investment instrument for investors to offset market risk at a time of global events such as the United Kingdom's vote to exit the European Union in June 2016, and the U.S. presidential election in November.
In addition, the ETF can be used as a buffer when Washington releases important economic data, which could move the global financial markets, the TWSE said.
Source: Focus Taiwan News Channel