Shares of companies that have good corporate governance records tend to post higher gains, according to Taiwan Index Plus Corp. (TIP, ??????), a wholly owned subsidiary of the Taiwan Stock Exchange (TWSE).
TIP, which compiles and manages indexes on the TWSE, said that with the benchmark Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) hitting a high of 9,385.65 for this year at the close on Oct. 25, the TWSE Corporate Governance 100 Index (??????100??) ended at a record high of 5,321.72.
The TWSE CG 100 Index was launched on June 29, 2015. The index is comprised of 100 stocks that scored among the top 20 percent under the exchange's Corporate Governance Evaluation System.
TIP said that as of Oct. 25, the TWSE CG 100 Index had gained 19.80 percent year-to-date, outperforming the TAIEX, which had risen 15.42 percent, indicating that the TWSE CG 100 Index has strong constituents chosen through a sound selection mechanism.
In addition to good corporate governance records, the TWSE CG 100 Index has two additional criteria: liquidity and financial health, which take into account a company's book value, net profits and revenue growth, according to TIP.
The TWSE CG 100 Index rose 12.91 percent in the previous 240 trading sessions, 14.88 percent in the previous 120 trading sessions, and 4.38 percent in the previous 60 trading sessions, beating the TAIEX's 8.95 percent, 13.16 percent and 3.40 percent gains during the three periods.
Another of the TIP's indexes, the TIP TAIEX+ Dividend Appreciation 150 Index (????150??), has also outperformed the TAIEX since it was launched on July 8, 2016.
On Oct. 25, the index closed at 5,450.58, the highest since its launch, having gained 9.01 percent between July 8 and Oct. 25, compared with a 6.81 percent increase recorded on the broader market.
According to TIP, the TIP TAIEX+ Dividend Appreciation 150 Index is comprised of 150 stocks that pay high cash dividends based on their good profitability.
The index has become one of the favorites of institutional investors who seek stable investment returns, TIP said.
Source: Focus Taiwan News Channel