Taiwan Stock Exchange Corp (TWSE) expects to double the number of initial public offerings (IPO) by domestic companies to trade their overseas operations on the local stock market this year, after the government scrapped a 40 percent cap on firms investing in China, an executive said yesterday.
The TWSE, which operates Asia’s seventh-largest stock market, said some companies had delayed their IPOs to avoid low IPO prices because of the gloomy economic outlook for this year, but said the relaxed rules for China-bound investment would provide an incentive for companies to list their overseas units at home.
Want Want China Holdings Ltd (中國旺旺控股), the nation’s largest maker of rice cakes and flavored milk, delayed Taiwan depositary receipts backed by shares in the company that were to be sold by the end of last year.
“They are waiting for a proper time [to list on the stock market],” TWSE chairman Schive Chi (薛琦) said yesterday. “We have attracted nine local firms to file IPO applications just in the four months since the ban was lifted.”
The TWSE’s goal this year is to attract another 18 IPOs for overseas operations of Taiwanese companies, Schive said.
In the past, local companies raised funds in Hong Kong or Singapore by offering shares of their overseas units to dodge government limits on China-bound investment.
However, most of those shares have under-performed the major indexes as investors there were not very familiar with them, the TWSE said.
Separately, the TWSE lowered its daily turnover target to an average of NT$100 billion (US$3.04 billion) for this year after it failed to reach its goal of NT$136 billion last year.
“This is a year full of changes in local stock markets in addition to the plunge in share prices,” Schive said.
The TAIEX plunged 46 percent to close the year at 4,591.22 points yesterday, compared with 8,506.28 on Dec. 31, 2007.
“Share prices are set to rebound this year since the worst is over,” said Alex Huang (黃國偉), an analyst at Mega International Investment Services (兆豐證券).
“The stock market may be set to recover along with the nation’s economy in the second half of the year,” Huang said.
The bourse is expected to return to between 6,000 and 6,500 points, helped by better prospects of large financial holding companies such as Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控), Huang said.
These firms may benefit from the flourishing life insurance market in China if Taiwan inks a memorandum of understanding with China early next year on upgrading local financial institutions’ Chinese offices into branches, he said.