The local futures exchange yesterday officially launched the nation's first batch of US-dollar denominated derivatives in cooperation with Morgan Stanley Capital International Inc (MSCI), hoping to further internationalize Taiwan's capital market.
The three new products are the MSCI Taiwan Index Futures, MSCI Taiwan Index Options and Gold Futures. Gold Futures are the exchange's first commodities product.
Transactions of the US-denominated futures and options products reached 16,990 contracts in the first trading day yesterday. Gold Futures concluded 453 contracts, according to the Taiwan Futures Exchange (TAIFEX).
Meanwhile, the Taiwan Stock Exchange and TAIFEX signed contracts with MSCI, authorizing the global equity index provider to use real-time transaction data and construct indices.
"We expect the rollout of the new products and the collaboration with MSCI to further enhance the level of internationalization and participation of foreign investors in Taiwan's futures market," Kong Jaw-sheng (龔照勝), chairman of the Financial Supervisory Commission, the nation's financial regulator, said at the launch yesterday.
Foreign participation
Foreign investment accounts for a minimal 3.23 percent of the local futures exchange, compared with overseas investors' 32 percent control of the local stock market, according to the commission.
The regulator hoped to raise the participation of overseas investment in the local futures market to 10 percent, TAIFEX chairman Wang Der-shan (
MSCI is one of the world's most widely consulted index providers, offering data to 3,000 institutional investors, according to the company.
The company also cooperates with Singapore Exchange Ltd in compiling MSCI Taiwan Index futures currently traded in Singapore's market, which raised concerns over potential competition in attracting investment.
"There is always an ... advantage for futures products traded in the local market," MSCI president and chief executive officer Henry Fernandez said.
"These two are complementary products that can attract different investors for the ultimate benefit of Taiwan's securities [market]," Fernandez said.
"The more people that want to trade, the [better off the] cash and derivatives market is," he said.
MSCI and the local exchanges may cooperate to roll out in the latter part of this year new fund products using indices not only from local market but also foreign ones, Fernandez added.
Developed market
Despite MSCI's move to revise upward Taiwan's stock market to full weighting in its emerging market indices last year, the company may not upgrade the status of the local market to "developed" any time soon.
The company was pleased to see the nation's efforts to abolish the qualified foreign institutional investor (QFII) mechanism -- which limits each overseas financial institution to a portfolio of Taiwanese shares of under US$3 billion -- and to allow foreign investment for speculation and arbitrage purposes, Fernandez said.
But MSCI would require more time to see if the regulatory relaxation lasts before the company would study the possibility of a further upgrade, he said.
Fernandez suggested that the nation's financial regulator and market administrators strengthen and introduce new products to be traded in local markets and move toward further relaxing foreign exchange controls to gain a status re-rating, which could bring in more foreign investment.
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