Taiwan builds bridges with the mainland
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"We understand we cannot isolate our exchange only in Taiwan: we need to extend our market"
Rong-I Wu, Taiwan Stock Exchange |
Stock market reform has come to Taiwan. The Taiwan Stock Exchange has launched a plan to merge the country’s various exchanges and platforms, and to list them next year.
"We don’t have a concrete plan on the amount of capital to be raised: we’re at the pre-IPO stage," says Rong-I Wu, chairman of the Taiwan Stock Exchange. But it is clear that the flotation will involve the merger of the stock exchange, the GreTai Securities Market second board, the Taiwan Futures Exchange and the Taiwan Depository & Clearing Corporation into subsidiaries of a single new holding company.
Why is this being done? "One reason is it will be more efficient and cost-effective if we merge the cash and the futures," says Wu. "Secondly we can push forward consolidation to promote our strategic direction for the future development of the exchange. We understand we cannot isolate our exchange only in Taiwan: we need to extend our market, to talk about finding a strategic alliance with an exchange in the US or Europe. The ultimate aim is that enterprises of all shapes and sizes can raise capital in Taiwan’s capital market."
In other measures, the TSE is introducing a lower trading cost for the securities borrowing and lending market; faster execution on short selling; and easier off-exchange transactions;
Foreign institutional interest in Taiwan’s market is growing. The total trading value of securities was $274 billion in the first quarter of 2008. Stock exchange representatives have roadshowed to New York, London, Hong Kong, Singapore and the Middle East recently in an attempt to attract capital and to tell the Taiwan story, apparently with some success: in the first four months of this year foreign investors accounted for 24% of trading volume compared with 20% last year, and for 31% of overall shareholdings. Foreigners like not only the valuations (though they are climbing) but the liquidity: over $700 billion market capitalization, combining the approximately 700 TSE companies with the 550 on GreTai, and $1.2 trillion in trading volumes between the two markets in 2007. Regulation and transparency are considered good by regional standards.
Bankers in the country like what they see. "It’s good for Taiwan," says CY Huang, president for greater China investment banking at Polaris. "All international stock exchanges are consolidating with each other. The Taiwan market cannot afford to be too fragmented."
"Ultimately what it [the TSE] should do is open its venue to other regional companies," Huang adds. "If you look at Hong Kong and Singapore, they are successful because they have not limited themselves to Hong Kong and Singapore companies. They’re open to all across the region."