FSC seeks to allay China investor fears

By Enru Lin ,The China Post

TAIPEI, Taiwan — In a move to ease qualms, the Financial Supervisory Commission (FSC, 金管會) said that if mainland Chinese retail investors were allowed into Taiwan’s equity market, they would be subject to restrictions and pre-existing security protocols. On Saturday, FSC Chairman William Tseng (曾銘宗) announced that Taiwan shares may be offered to Chinese retail investors for the first time as early as January. The FSC has permitted Chinese institutional investors to invest in the Taiwan stock market since 2010 and is developing a program for retail investors from mainland China to do the same, he said. Kuomintang (KMT) Legislator Lu Shiow-yen (盧秀燕) yesterday called the plan into question during an interpellation session at the Finance Committee of the Legislative Yuan. Freeing access to the local bourse for “mainland China’s uncles, aunties, brothers, younger sisters and older sisters … creates public anxiety,” she said to FSC Vice Chairman Huang Tien-mu (黃天牧) yesterday. Huang replied that if the plan were implemented, retail investment from mainland China would be subject to all of Taiwan’s pre-existing security protocols for overseas investment. “When overseas investors enter to purchase shares, they are assigned a number and monitored,” he said. “We have rules on overseas investment and we will simply abide by the rules.”

Huang said the FSC was working with competent authorities and industry representatives on a plan that will be launched once a consensus is reached. The latest version of the plan sets restrictions on investment quantity and value that are within limits set for Qualified Domestic Institutional Investors (QDII), according to Huang. “The limits will be within the caps for QDII. Of course, if the fund or trust is denominated in U.S. dollars, the maximum investment is around US$500 million,” he said. Currently, no single QDII can invest more than US$100 million or hold over 5 percent in Taiwan’s financial sector; all QDIIs cannot invest in over 10 percent of the sector. QDII investment is also subject to quotas in the telecommunications and real estate sectors. The FSC and the Central Bank believe opening access to retail investors from mainland China would be positive for the TAIEX, Huang said.

Drop in Shares on MSCI Downgrade: FSC Taiwan shares closed down 0.93 percent just above 8,320 points on turnover of NT$132.32 billion, sliding by 150 points at one point. Huang said the poor showing was due to investors’ uneasiness over cuts to Taiwan’s weighting by global index provider MSCI Inc., set to take effect at the end of the trading. In mid-November, MSCI Inc. announced that it would lower Taiwan’s weighting by 0.43 percentage points to 11.91 percent. Huang yesterday reiterated that the FSC was confident in the main index. Publicly traded companies in Taiwan earned a profit of NT$1.5 trillion during the first three quarters, a signal of sound fundamentals, he said.