Mon, Nov 21, 2005 - Page 11 News List

Planning for future financial prosperity

Juggling the roles of an umbrella regulator, active promoter and reformer of the nation's financial sector, the Financial Supervisory Commission seems to be constantly in the spotlight. Chairman Kong Jaw-sheng talked with `Taipei Times' staff reporter Amber Chung about his vision for Taiwan's capital markets

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Financial Supervisory Commission Chairman Kong Jaw-sheng thinks Taiwan has to be active in raising its international visibility.

PHOTO: LO PEI-TEH, TAIPEI TIMES

Taipei Times: People have been expecting the proposed foreign-currency denominated "offshore bourse" to expand Taiwan's capital markets. Do you have a clear timetable to carry out this unprecedented redesign of the nation's fund-raising sector? [Editor's notes: the offshore bourse comprises stock exchange, bond and futures markets. The bond and gold futures exchanges are slated to kick off early next year.]

Kong Jaw-sheng (龔照勝): We plan to submit a complete programme to the Executive Yuan for review by the end of this year. The timing to launch the US dollar-denominated stock market could fall in the middle or second half of next year, following a series of overseas promotions and a review of applications in the first half of the year.

We hope to recruit about 20 companies to go public in the bourse once it is inaugurated. We are targeting companies or joint ventures that specialize in either traditional industries or the high-tech sectors and have development potential and are established outside the territory by overseas Chinese and foreigners.

These firms must be profitable and have at least US$30 million in market capitalization. We have exchanged views on this matter with several entrepreneurial leaders but have no real talks going on for the moment.

TT: McKinsey & Co said recently Taiwan has only one golden year left in which to build up the nation's position as a regional fund-raising hub, as increasing numbers of China-based Taiwanese companies make their initial public offerings (IPO) in Hong Kong, rather than in Taiwan. Has the plan been delayed by the Mainland Affairs Council over capital outflow concerns?

Kong: The launch of the offshore bourse is not being delayed and has certainly not been blocked by the council. The commission needs time to solicit viewpoints from interested parties and professionals and to engineer crucial support measures related to the US dollar settlement mechanism, application review, underwriters' pricing and market-making activities.

Taiwan has failed to seize two significant opportunities to develop into a regional finance hub in the past -- one was in 1995 to 1996, when the nation vowed to turn itself into a regional operations center, and the other was in 1997 and 1998, when the Asian Financial Crisis ailed most of the countries in the region, except for Taiwan. Therefore, we must take this chance to make a success of launching the international bourse through thorough planning. We will not allow Hong Kong to overtake Taiwan and become an alternative version of the nation's offshore bourse.

Hong Kong may attract IPOs but Taiwan is powerful as a refinancing platform. With advantages of high liquidity and strong bases of manufacturing and high-tech industry, Taiwan stands a good chance of becoming a fund-raising center in the region.

TT: The initiative of setting up the international bourse is in part designed to woo the funds of China-based Taiwanese firms that are subject to a regulatory investment cap, which states that only 40 percent of capital raised in the nation can be invested in China. Has the commission suggested any relaxation of this restriction to the related government agencies? Can China-based Taiwanese firms go public in the planned offshore bourse?

Kong: We found through our meetings with overseas investors last month that they were more confident in Taiwan's ability to become a regional finance hub than we had originally thought. However, they suggested that a more practical cross-strait policy is required -- one which separates economic issues from political ones -- if Taiwan is to reach its goals. They raised concerns over the investment cap that forces China-based Taiwanese companies to raise funds outside the nation.

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