Taiwan capital market faces problems: experts

Cathy Chou, The China Post

Although Taiwan’s capital market has gradually improved in structure, the market system still has several problems, some financial experts noted yesterday on the second day of an international conference. “The large gap between interest rates for borrowing and lending allows banks to generate handsome profits, but it is unfair to residents who save money at banks,” said Lin Chien-fu, chairman of the Department of Economics at National Taiwan University.

He added that he did not regard it proper for companies to issue stock certificates to employees as yearly bonuses given the uncertain market prospect.

Richard Lin, president of the futures division of Taiwan Securities, said Taiwan’s capital market is ripe for companies to raise funds. However, he urged the government to be stricter in controlling the capital flow across the strait, saying that some companies raised funds from Taiwan to support their investments in the mainland.

Lin also advised the government to boost the bond market by improving the market system. He said that the bond market has the potential to succeed the stock market in daily turnover.

As for the problems in traditional industries, Lin suggested that companies in traditional sectors apply modern corporate governance concepts to enhance their operations.

Michael Lin, secretary general of Taiwan Securities Central Depository Company, Ltd. (TSCD), noted that there is still plenty of room for improvement in the current settlement and depository systems.

On stock trading, for example, he said, “The Taiwan Stock Exchange (TSE) is in charge of the settlement system for any stock transaction, but in reality it entrusts the TSCD to implement the detailed settlement procedures.

“The government recognizes the importance of market reforms, but sometimes it delays the reform schedule due to the difficulties involved with policy implementation,” said Ding Ke-hwa, deputy chairman of the Securities and Future Commission (SFC). He stressed that the SFC has formed a committee focusing on market reform and its members hold meetings regularly to search for solutions to current problems.