Taiwan, which has Asia's fifth-largest stock market, will ease trading restrictions next year, including the 7 percent limit that shares may move in one day, in a bid to attract foreign investors, the nation's new financial regulator said.
The Financial Supervisory Commission will allow shares in companies that sell stock for the first time to trade without restriction for five days, Chairman Kong Jaw-sheng (
The limit may be raised to about 10 percent and then possibly scrapped within 18 months, he said.
"Once you open the market in line with international standards, foreign investors will feel more comfortable," Kong said.
A fifth of Taiwan's US$420 billion stock market is held by overseas investors, compared with 44 percent in South Korea. Overseas investors are banned from short-selling, a restriction Kong said he plans to lift. Local investors, under separate rules, may conduct such transactions.
"Overseas investors, especially hedge funds, will be happy to see this happening," said Winnie Tiao (刁明華), chief investment officer at HSBC Asset Management Taiwan. "The move fully addresses the needs of overseas investors."
Ending the ban on short selling would enable overseas investors to better manage risk because they could protect themselves from share declines.
Kong, 49, said he expects Taiwan's legislature to pass revisions to the Securities and Exchange Law (
Changes will be made step-by-step, depending on market reaction, he said. Kong said he will also push for talks with China.
"We welcome dialogue with China, but the ball is in their hands," Kong said.
Nine Taiwan banks have representative offices in China, and in the near future, Kong said he hopes to allow China's banks to have similar representation in Taiwan.
"What Kong has to do is to convince his superiors to push for a breakthrough in cross-strait financial communication as no one can ignore the [Chinese] market," said Chi Schive (
"Kong has a big challenge ahead and he has to keep on moving in order to accomplish such a big agenda."
Kong, who has a master's degree from Indiana University, also said he will offer incentives to banks in Taiwan to merge, such as overseas branch approvals and licenses for new products.
The nation's 50 banks serve a population of 23 million people.
"I would love to see a couple of key players in three areas: insurance, securities and banking," in two years, Kong said, adding that he expects the creation of one bank with a market share exceeding 10 percent within a year.
There are "a couple of deals" in development, he said.
"Our goal is at least one deal with foreign investors."
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