Stock Analysis & Valuation The Taiwan Fund, Inc. (TWN)

• Previous Close: $57.61
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	294.30	411
Intrinsic value (DCF)	651.90	1032
Graham-Dodd Method	88.17	53
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

The Taiwan Fund, Inc. (NYSE: TWN) is a closed-end equity mutual fund specializing in Taiwanese public equities. Managed by JF International Management Inc., the fund invests across diversified sectors in Taiwan, leveraging fundamental analysis to evaluate growth prospects, competitive positioning, and financial health. Established in 1986, TWN benchmarks its performance against the TAIEX Total Return Index, offering U.S. investors exposure to Taiwan's dynamic economy. With a market cap of approximately $236 million, the fund focuses on high-growth sectors, including technology and manufacturing, which dominate Taiwan's equity landscape. TWN's strategy emphasizes factors like R&D, productivity, and government regulation, making it a unique vehicle for investors seeking targeted Taiwanese market exposure. The fund's strong historical performance, reflected in its $97.2 million net income and $13.56 diluted EPS (FY 2024), underscores its role in diversifying global portfolios with Asian equities.

Investment Summary

The Taiwan Fund (TWN) presents an attractive niche investment for exposure to Taiwan's equity market, which is heavily weighted toward semiconductors and technology—a sector with strong global demand. The fund's $7.40 dividend per share (FY 2024) and zero debt enhance its appeal for income-focused investors. However, risks include geopolitical tensions involving Taiwan, market volatility (beta of 1.13), and reliance on a single regional economy. The fund’s concentrated focus may limit diversification benefits, but its active management and sectoral breadth within Taiwan could mitigate some risks. Investors should weigh Taiwan's growth potential against these regional uncertainties.

Competitive Analysis

The Taiwan Fund’s competitive edge lies in its specialized focus on Taiwanese equities, a market underrepresented in most global funds. Unlike broad emerging-market ETFs, TWN offers targeted exposure to Taiwan’s tech-heavy economy, home to giants like TSMC. Its active management allows for tactical shifts in sector allocation, a contrast to passive index funds. However, the fund faces competition from broader Asia-Pacific funds and Taiwan-specific ETFs like the iShares MSCI Taiwan ETF (EWT), which offers lower fees and higher liquidity. TWN’s closed-end structure can lead to premiums/discounts to NAV, adding volatility. Its outperformance against the TAIEX benchmark (subject to FY 2024 data) suggests skilled stock selection, but its higher expense ratio compared to ETFs may deter cost-sensitive investors. The lack of leverage (zero debt) is a conservative positive but may limit returns in bullish markets.

Major Competitors

• iShares MSCI Taiwan ETF (EWT): EWT is the largest Taiwan-focused ETF, offering low-cost, passive exposure to Taiwanese equities. It tracks the MSCI Taiwan Index and holds ~90% of TWN’s market cap, with lower fees (0.59% expense ratio vs. TWN’s ~1.5%). However, EWT lacks active management, potentially missing sectoral opportunities TWN captures. Liquidity is superior, but performance may lag in volatile markets.
• Franklin FTSE Taiwan ETF (FLTW): FLTW provides passive exposure to Taiwan’s large- and mid-cap stocks, tracking the FTSE Taiwan Capped Index. It’s cheaper than TWN (0.19% fee) but less flexible in stock selection. Its capped methodology reduces single-stock risk, unlike TWN’s concentrated bets. AUM is smaller, impacting liquidity.
• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): While not Taiwan-focused, ASHR competes for Asia allocations. It offers mainland China exposure, a geopolitical counterweight to Taiwan. Broader diversification but higher regulatory risk. TWN’s Taiwan-centric approach may appeal to those avoiding China’s market complexities.