The truth behind the record highs in Taiwan stocks: How high-yield ETFs become the market's rational choice

Taiwan stocks recently broke through 28,400 points to hit a new all-time high. Behind the seemingly lively and prosperous market, there is a subtle shift in investor sentiment. As the market continues to reach new highs, the flow of capital quietly reveals the true thoughts of the market—over the past month, high-yield ETFs have almost completely overshadowed other investment tools in the top trading rankings.

Market Rotation Signal: Why High-Yield ETFs Are the First Choice

Fubon Taiwan Select High Dividend (00919) has risen 2.33% in recent months, outperforming the broader market. With a stable annualized dividend yield of over 10% for 11 consecutive quarters, it has become one of the most popular dividend-paying stocks. This is not just a victory for a single fund but a reflection of the overall market sentiment shift.

According to trading volume statistics, five of the top ten passive Taiwan stock ETFs by daily average trading volume are high-yield products, including 00919, Cathay S&P 500 High Dividend (00878), Fubon Select High Dividend 30 (00900), Yuanta High Dividend (0056), and Yuanta Taiwan Value High Yield (00940). This data reveals a clear signal: when the stock market is at a high level, investors are not blindly chasing the rally but are instead more cautious, considering downside protection and cash flow stability.

In an environment where AI concept stocks have experienced astonishing gains and overall valuations are already high, capital faces a fundamental dilemma—should it continue to follow the future stories of tech giants, or turn to those with transparent operations, confirmed profits, and a willingness to reward shareholders?

Warnings from the International Market: The Debate Over the Definition of Quality Stocks

The U.S. market is staging a classic debate about “what constitutes a quality investment,” providing valuable reference for Taiwanese investors shifting toward high-yield ETFs.

iShares MSCI USA Quality Factor (QUAL) and Invesco S&P 500 Quality (SPHQ) are both known for financial robustness, each with assets exceeding $10 billion. However, their stock selection logic diverges at a critical point.

SPHQ’s unique approach is to set “accrued items” as a core screening indicator—focusing on the proportion of “actual cash received by the company,” rather than illusory accounts receivable on the books. Based on this logic, SPHQ has recently divested from AI giants like NVIDIA, Meta, and Microsoft, mainly because their accounts receivable have surged, risking a decline in cash profit quality. For example, NVIDIA’s latest financial report shows a $16 billion increase in accounts receivable, meaning the company must prepay large sums to wait for customer payments, putting cash flow quality to the test.

In contrast, QUAL does not adopt this indicator, so its portfolio remains heavily invested in tech giants. The performance difference is evident—when AI stocks soared, SPHQ temporarily led; but over the past six months, QUAL has significantly outperformed by sticking to tech stocks.

This debate points to a deeper question: Will the billions of dollars that tech giants pour into AI become a future profit goldmine, or will they turn into financial black holes? As corporate cash flows tighten and debt investments increase, does the so-called “quality” halo still hold firm?

The Pragmatic Path of High-Yield ETFs in Taiwan: Balancing Growth and Safety

Faced with similar market concerns, Taiwan’s high-yield ETFs demonstrate a more pragmatic approach. For example, 00919’s manager, Hsieh Ming-Chih, clearly states that as the market reaches high levels, some funds are shifting from the already-rallying AI tech stocks to value stocks with reasonable valuations, solid operational fundamentals, and dividend potential, with financial stocks being a key focus.

Financial stocks still have room for profit growth in a low-interest-rate environment, and their dividend payout potential remains relatively stable. This makes them a crucial allocation for high-yield ETFs to balance risk and return. This “growth stocks combined with value stocks” approach not only pursues ongoing income but also captures price difference opportunities during market rotation. 00919’s latest quarterly dividend remains at 0.54 yuan, with the ex-dividend date set for December 16. Its long-term stable dividend policy is a key reason attracting continuous capital inflow.

The Evolution of Investment Logic: Certainty Over Dreams

BlackRock’s chief investment strategist Wei Li once sincerely pointed out that the uncertainty brought by AI is too great. The current “spend first, expect future income later” business model has not yet been fully validated for profitability. This explains why many savvy investors, after the market peaks, are turning to high-yield ETFs—rather than chasing glamorous future visions, they prefer to hold onto more certain cash flows.

Dimensional Fund Advisors’ research director Mamdouh Medhat’s view is more straightforward: quality investments do not need to be overly complicated. As long as you focus on companies with abundant profits, reasonable valuations, and moderate capital expenditures, the long-term excess returns will naturally emerge.

Conclusion: Seeking Certainty in Uncertainty

When Taiwan stocks hit new highs, the flow of capital has already given the clearest answer: high-yield ETFs are becoming the most trusted vessel for capital in volatile markets. Whether it’s the ongoing debate in the U.S. about the definition of “quality” or Taiwanese investors’ persistent pursuit of income, they point to the same investment truth—amidst an environment filled with uncertainty, companies with strong financial health, stable cash flow, and a willingness to return value to shareholders are the true pillars of a long-term investment portfolio.

For investors, rather than being entangled in the temptation of AI “dream stocks,” a diversified basket of high-yield stocks can share in market growth while effectively reducing volatility. Such an asset allocation strategy may be a more rational choice in the current market environment.