A local investor smiles at the close of the Taiwan Stock Exchange in a brokerage in Taipei. The revised regulations for the Taiwan stock market are expected to boost the local market. AP

The Taiwan Stock Exchange Corporation (TSEC) has set its sights on attracting Taiwanese companies in Southeast Asia and mainland to list on the bourse.

The hope is to abolish the 40 percent cap of Taiwan-listed companies' net values on mainland-bound investment growth after the new election.

Michael Lin, vice president of TSEC, said that newly-elected "president" Ma Yinjeou has promised to adjust the mainland-bound investment cap for Taiwanese-listed companies. But there is no timetable.

The 40 percent cap implemented by the Taiwanese government has driven many companies away from Taiwan. These companies then list in other bourses, including in Hong Kong, on the Chinese mainland and in countries such as Singapore.

Lin hopes that the removal of such a policy will encourage these companies to go back to Taiwan's securities market. Currently, there are more than 100 listed Taiwanese companies, and many other unlisted Taiwanese companies are located in Asia's financial center of Hong Kong, and in Asian countries such as Vietnam and Malaysia.

Many such firms are manufacturers, such as Foxconn and Uni-president.

They have substantial investment on the mainland, which provides relatively cheap labor and a booming consumer market.

TSEC raised its expectations for new IPOs this year to between 40 and 50. There have already been 17 new listings on the bourse in the first half. However, none have been Taiwanese companies based overseas.

A director at a Taiwanese brokerage firm in Hong Kong said the relaxation of the 40 percent cap will be a big incentive for Taiwanese companies to go back to Taiwan, as the listing cost in Hong Kong is much higher than in Taiwan.

ETF and consolidation

Giving updates of the bourse in a media roundtable discussion in Hong Kong yesterday, Lin said the bourse also hopes to promote the dual listings of ETF (Exchange Trade Fund) in Taiwan and Hong Kong after the relaxation of related regulations.

"This will allow the mainland's QDII (Qualified Domestic Institutional Investors) to invest in Taiwan indirectly," Lin said.

The Taiwan bourse is also learning from Hong Kong's reformation of its warrant market.

Meanwhile, Taiwan's top financial regulator, Financial Supervisory Commission (FSC), said recently that it may allow QDII to invest in Taiwan's funds or stocks indirectly, through foreign funds carrying Taiwanese securities.

To enhance its competitiveness and efficiency, TSEC has started the consolidation with Gre-Tai Securities Market (the Over-the-Counter market), the Taiwan Futures Market, and the Taiwan Depository and Clearing Corporation.

Lin said that TSEC hopes to complete the consolidation by the end of this year and go public in 2009.

The bourse also hopes to introduce foreign strategic investors, allowing share swaps of up to 25 percent stakes. Stock exchanges from the United States, Europe and the Middle East have shown interest.

(HK Edition 06/06/2008 page2)