Tue, Feb 15, 2005 - Page 10 News List

Officials plan offshore stock market

GRAND PLAN A US dollar-denominated offshore stock market will be able to attract listings of China-based Taiwanese companies and dodge Taiwan's investment cap

By Joyce Huang  /  STAFF REPORTER

The government plans to create a new US dollar-denominated offshore stock market in the second half of this year to attract listings of companies registered overseas, including China-based Taiwanese companies, Financial Supervisory Commission Chairman Kong Jaw-sheng (龔照勝) said yesterday.

"It is an important policy direction to create a new offshore stock exchange in the third quarter, along with the relaxation of the [7 percent] daily trading limit," Kong told a Lunar New Year gathering at the Taiwan Stock Exchange Corp (TSE) yesterday.

TSE chairman Wu Nai-jen (吳乃仁) also lauded the yet-to-be-established new stock exchange and said it will immediately help solve the controversy over an investment cap, which stipulates that only 40 percent of funds raised in this country can be invested in China. This discourages China-based Taiwanese companies from listing on the local bourse.

Wu yesterday cited the Tokyo Stock Exchange "Mothers," or a market of high-growth and emerging stocks, as a successful example, saying that a similar "Mothers" board in Taiwan should be able to allow listings of China-based Taiwanese companies without them having to be bound by the 40 percent investment cap on China-bound capital flight, which would require time-consuming legislation or law revisions to relax.

The stock exchange plans to hammer out a draft regulatory system by the end of next month to manage the future "offshore stock market" before it can be launched as early as July, according to TSE senior executive vice president Su Song-chin (蘇松欽).

"Only companies registered overseas will be allowed to list on the new stock exchange, which will surely be open to local liquidity," Su said.

Although a detailed plan to launch the nation's offshore stock exchange is yet to be proposed, Kong yesterday vowed to attract the listings of Taiwanese companies that have set up holding companies in other countries to make China-bound investments, so as to avoid the 40 percent investment cap.

Wu said that the TSE will look at Hong Kong's experience while designing the new offshore stock exchange's regulations.

The nation's planned offshore stock exchange will not be an exact copy of the Tokyo Stock Exchange "Mothers" Board. But its success will hinge on its competitiveness as measured against other stock exchanges including Tokyo's "Mothers" Board, said Edward Chow (周行一), a finance professor at National Chengchi University.

"Such a proposed breakthrough on the free flow of cross-strait capital should be highly recommended although the proposed offshore stock exchange will still have its limits," Chou said.

Chou said that the planned offshore stock exchange may have cleverly dodged the 40 percent investment cap, but won't be able to address the core issues -- rising cross-strait tensions and the absence of cross-strait business jurisdiction to ensure listed companies' financial closure, which stymie possible cross-strait investments.

In lieu of cross-strait business jurisdiction, risks for local investors to make share investments in China-based corporations are still high, which may scare them away from the offshore stock exchange, he said.

He nevertheless urged the government to design an offshore stock exchange that provides convenience to raise capital with low costs and high liquidity, so as to compete with other bourses in the world.

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