TAIEX to launch SME sub-market

A sub-market of the Taiwan Stock Exchange (TAIEX) will soon be launched, allowing the nation's small and medium-sized enterprises (SMEs) based in Asia to raise funds from the world's institutional investors, Financial Supervisory Commission chairman Hu Sheng-cheng (胡勝正) said on Monday.

"To expand the nation's capital market, the commission will soon launch the TAIEX's sub-market, similar to what had formerly been coined the major bourse's international slate," Hu was quoted as saying.

"We plan to first target Taiwa-nese SMEs based outside China, such as Vietnam, Thailand and Indonesia, with capital of between NT$50 million (US$1.6 million) and NT$600 million," Hu said, without giving a definite timetable.

Modeling itself on the London Stock Exchange's alternative investment market, the commission will also offer incentives for companies to get listed, including a more flexible regulatory system than that in place for the approximately 600 companies listed on the TAIEX.

Companies that are allowed to list in the sub-market will not be required to install independent directors to their boards, Hu said, adding that they would also enjoy lax accounting standards as long as they incorporated using international standards.

Although sub-listed companies can bring fatter rewards, they can also pose a higher risk, Hu said, adding that the market would only be open to institutional investors to share investments.

He also extended his welcome to multinational companies to obtain a listing.

The commission's new proposal seeks to attract foreign capital, but market watchers yesterday said the nation will need to rid itself of political uncertainty to avoid scaring potential investors.

"It is political uncertainty, before or after the upcoming elections, that is keeping foreign investors from buying Taiwanese shares," said Renee Chan (詹茹心), head of market communications at ING Securities Investment & Trust Co.

Chan said, however, that the commission's sub-market proposal was a good idea.

Despite local listed companies' robust earning performance, the TAIEX has lagged behind major Asian markets, Chan said.

She said the company expected TAIEX-listed companies to average a 26 percent earning growth, with an averaged price-to-earning ratio of 14 this year, although their earning growth could decline to 13 percent next year.

In this context, we would expect domestic and international investors to be very bullish about the TAIEX, Chan said. But because of the unstable political climate in Taiwan, investors have avoided the market.