State should foster private equity shops, pundits say

As foreign private equity funds become increasingly active, investors should turn the tables by pooling idle funds to invest internationally, pundits said yesterday.

"Although Taiwan is a relative latecomer to the private equity fund market, it has abundant idle cash that could be used to invest in and acquire international companies," said Thomas Lee (李桐豪), an finance professor at National Chengchi University.

The financial regulator should adopt the idea of limited partnership and improve regulations to foster the nation's private equity shops, he said, citing the development of South Korea's MBK Partners Ltd.

Lee made the remarks during a seminar on private equity fund trends in Taiwan co-organized by Citigroup and National Chengchi University.

Private investors have been increasingly active in Taiwan over the past two years, targeting media service providers, financial institutions and high-tech business.

Last November, Carlyle offered to buy all of Advanced Semiconductor Engineering Inc's (ASE, 日月光半導體) outstanding common shares for US$5.46 billion, in what would be the biggest ever acquisition in Taiwan.

MBK Partners had offered to buy 60 percent of China Network Systems Co (中嘉網路), Taiwan's second-largest cable TV provider, for NT$30.9 billion (US$938.92 million) one month earlier.

"Private equity funds represent a rising power that cannot be ignored," said Du Ying-tsong (杜英宗), chairman of Citigroup Global Markets Taiwan Ltd.

Some market watchers say private equity funds pose risks to mass retail investors and may contribute to the shrinking of the capital market as firms could delist from local stock markets.

As a result, the Taiwan Stock Exchange Corp (TSE) has been studying the possibility of designing a mechanism that would allow certain firms to relist, TSE president Samuel Hsu (許仁壽) said.