Index compiler FTSE Group kept its classification for Taiwan at advanced emerging market status, but the Taiwan stock exchange would study plans to improve the country’s investment environment, the Taiwan Stock Exchange Corp (TWSE, 台灣證券交易所) said yesterday.
Taiwan has been on the FTSE Watch List for possible promotion since 2004 and a move to developed market status would have placed Taiwan on par with other regional peers such as Hong Kong, Singapore and Japan.
The TWSE said in a statement that Taiwan would remain on the watch list to be upgraded and it still lacks in areas such as a free and well-developed foreign exchange market and a better process for off-exchange transactions.
However, the exchange said it would continue to improve the country’s investment environment to play catch-up with other rivals in the developed markets. The exchange did not say when FTSE will review the status again.
Meanwhile, Taiwan has a flexible foreign-exchange rate policy and maintains “dynamic stability” in its currency, the central bank said in a statement yesterday.
The central bank will “maintain order” in the currency market if irregular factors cause excessive volatility, the bank said, after it learned that currency restrictions was one of the factors deterring the FTSE from upgrading Taiwan’s market status.
The central bank said there are no restrictions on funds being transferred in and out of Taiwan for investment in the country’s securities and its currency policy has not drawn criticism from overseas investors.
The FTSE news came after Taipei’s financial markets closed. The main TAIEX index rose 0.5 percent to a 14-month closing high, while the NT dollar rose to a more than three-month high.
Paul Hoff, FTSE’s managing director for Asia Pacific, said in July that Taiwan needs to make the local currency more freely available and implement changes to rules on stock borrowing and lending before the island can win “developed market” status.
Reclassification would enable funds overseeing a larger pool of capital to consider investing in the country’s assets.
Korea Exchange Inc, South Korea’s bourse operator, expects as much as US$21.3 billion of net inflows as the country will be upgraded to a developed market by FTSE on Monday.
The exchanged said in a statement on Sept. 10 that it increased its estimate for the amount of money that will flow in as a result of its new developed-market status at FTSE from US$16 billion projected at the time of the upgrade was announced in September last year.
The amount was increased to reflect the higher market capitalization, the South Korean exchange said.
Yesterday, United Arab Emirates shares rose, with Dubai’s benchmark index increasing to a three-month high, as the countries stock markets were upgraded to “emerging market” status by FTSE.
The UAE move to “secondary emerging market” status will be effective in September next year, said FTSE.
FTSE bases its assessment on a list of factors, including the regulatory environment and transparency.
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