Taiwan, Hong Kong to ink fund deal

Taiwan plans to ink an official letter of intent with Hong Kong in early April which will allow local trust funds to begin sales in Hong Kong -- to raise capital from Hong Kong and Macau -- after acknowledging each other's markets as being legal, the Financial Supervisory Commission (FSC) announced yesterday.

Likewise, the sale of Hong Kong-registered funds will be allowed here after the intent letter is inked, according to the Financial Supervisory Commission (FSC).

"We have reached an initial consensus to foster further cooperation in the financial services industry between Taiwan and Hong Kong," FSC Chairman Kong Jaw-sheng (龔照勝) told reporters yesterday morning after a one-hour closed-door meeting with Andrew Sheng (沈聯濤), chairman of Hong Kong's Securities and Futures Commission.

Sheng, who is the highest-ranking finance official ever to visit Taiwan, yesterday successfully made his trip to Taipei and attended the International Organization of Securities Commissions' (IOSCO) two-day meeting here.

According to FSC vice chairman Lu Daung-yen (呂東英), Kong and Sheng had shared the same view in acknowledging each other's market as being legal and launching sales of the two markets' funds during their meeting in Hong Kong early last month.

After yesterday's talks to discuss further details, both Taiwan and Hong Kong will soon draft the letter of intent to include a new mechanism for both sides to jointly manage the funds' sale as well as the types of funds that will be allowed once they are launched in each other's market, Lu said.

The letter of intent will also finalize whether the sale of hedge funds, which are high-risk in nature and currently banned in Taiwan, will be allowed, Lu added.

According to Lu, Kong and Sheng are scheduled to officially sign the letter of content to launch the funds' sales in early April when the IOSCO holds its annual meeting in Sri Lanka.

Lauding both commissions' move to mutually benefit each other's markets, Henry Lin (林弘立), president of the Securities Investment Trust and Consulting Association, yesterday said the memorandum's inking will push forward the local capital market's internationalization.

But Lin said it is still too early to say how big a business opportunity it will be when Taiwan-related funds are launched to attract Hong Kong investors.

He added that, after the memorandum is signed, local fund managers will soon explore the possibility of catering to Hong Kong-based institutional investors, instead of individual investors since individuals are less likely to be interested in Taiwanese funds.

According to Lin, Taiwan has long opened its market to overseas funds from Hong Kong.

Addressing yesterday's IOSCO meeting, Vice Premier Wu Rong-I (吳榮義) vowed to cut back governmental interference in the nation's economic and financial systems by fostering the local market's liberalization.

Kong heralded the nation's efforts in financial reforms, which are recognized by the international community since the level of the local banking sector's liberalization is ranked in the second place among other countries in the world.

Hong Kong's Sheng yesterday urged IOSCO member countries to strengthen cooperation so as to jointly fight against financial scandals that have seriously threatened financial integrity.

Some 60 representatives from over 20 countries yesterday attended the IOSCO meeting.