TSMC's stock price continues to lag behind its competitor United Microelectronics, with high dividend ETFs being the main reason for the "cold shoulder"?
Taiwan Semiconductor has been rejected by multiple high-dividend ETFs, leading to its stock price performance lagging behind United Microelectronics. Data shows that Taiwan Semiconductor's stock price has fallen 3.7% this year, while United Microelectronics has risen 11%. The high dividend yield of United Microelectronics has attracted capital inflow, making it a heavy holding in ETFs. Analysts point out that the low valuation and high liquidity of United Microelectronics attract conservative investors, but its outperformance may be difficult to sustain. Taiwan Semiconductor has strong fundamentals, with sales expected to grow by 39% in the second quarter
According to Zhitong Finance APP, due to the world's largest foundry TSMC (TSM.US) being "rejected" by several leading high-dividend exchange-traded funds (ETFs) in Taiwan, the stock price has continued to lag behind its competitor United Microelectronics. Bloomberg data shows that TSMC's stock price has fallen 3.7% this year, while UMC has seen an increase of 11% during the same period. UMC's dividend yield of over 6% makes it a major holding in Taiwan's high-dividend ETFs, which exceed $44 billion in scale.
Andrew Tsai, Chairman of KGI Securities, pointed out: "UMC benefits from the inflow of funds from local high-dividend ETFs, as passive funds focus more on yield rather than fundamentals." He added that as the ex-dividend date of June 24 approaches, UMC's stock price has further strengthened.
Taiwan's three major high-dividend ETFs all list UMC among their top ten holdings, while TSMC, with a dividend yield of less than 2%, is not included in their core allocations. These three ETFs have attracted approximately $10 billion in inflows this year, making them some of the strongest equity ETFs in the Asia-Pacific region in terms of capital absorption.
Analysts indicate that UMC's low valuation and high liquidity are quite attractive to conservative investors seeking defensive allocations, and its collaboration with Intel adds another layer of appeal. However, UMC's outperformance may be difficult to sustain—S&P Global data shows that its short interest as a percentage of float has risen to a historical high of 9%, and its stock price has surpassed analysts' average 12-month price target.
TSMC's fundamentals remain strong; as a key chip manufacturer for NVIDIA (NVDA.US) and Apple (AAPL.US), the global foundry leader reported revenue of NT$320.5 billion (approximately $10.7 billion) in May, a year-on-year increase of 39.6%. In April, TSMC's revenue grew by 48% year-on-year. Analysts expect TSMC's sales in the second quarter to grow by 39%
