By Kathrin Hille -
Taiwan's financial regulator is considering creating an offshore stock market in an effort to establish the island as a regional fund-raising centre.
The Financial Supervisory Commission also wants to improve the listing requirements as part of a plan to double capital raising by foreign investors.
The offshore proposal, which could be implemented by 2007 at the earliest if approved, is also an attempt to skirt around restrictions on domestic listings of companies with substantial investments in China.
Kong Jaw-sheng, FSC chairman, said that under the proposal, the government would create a foreign currency-denominated board for listings by foreign companies, including Taiwanese-owned enterprises with operations in mainland China but which are registered in offshore tax havens.
Currently, companies listed on the Taiwan Stock Exchange are banned from having more than 40 per cent of their paid-in capital invested in China.
The rule has driven many Taiwanese enterprises to separate their mainland operations from their parent companies. This has deprived shareholders of potential earnings from the companies' China operations and contributed to problems with corporate transparency on the island. It has also effectively barred many China-based, Taiwanese-owned companies from listing on their domestic market.
Foxconn International Holding, a mobile handset maker owned by Taiwan's Hon Hai Precision Industries, but with most of its manufacturing in China, is preparing to hold a US$430m IPO in Hong Kong this month partly because of these difficulties.
Taiwan's central bank estimates that the island's companies have invested US$70bn on the mainland.
Last summer, the government promised to facilitate listings of China-based Taiwanese companies on the domestic market. But the policy discussions have ground to a halt over concerns in the ruling party and its anti-China ally, the Taiwan Solidarity Union, that this would increase the island's economic dependence on the mainland.
Analysts say this policy means Taiwan is missing a prime opportunity to attract foreign investors to its share market by preventing them from buying exposure to China's growth.
Asked whether the government would lift the 40 per cent cap on China investments, Mr Kong said the FSC was seeking a broader solution aimed at "quality companies" from all over the world.
However, analysts doubt the idea will spark the foreign interest the FSC is hoping for. Not only would it compete with the existing market for liquidity, it was not clear how it would enhance transparency.
Source: Financial Times
