The Financial Supervisory Commission (FSC) yesterday said it was removing the cap on investment by Taiwanese onshore fund companies in Chinese securities to give them more flexibility in meeting the needs of investors.
The commission said in a statement that domestic securities investment trust companies and discretionary account managers would no longer be subject to a rule that restricts their investment in Chinese securities at up to 30 percent of their net value.
A discretionary account is a securities account where clients authorize a partner, director or qualified portfolio manager to make decisions, select securities and execute trades on their behalf without prior consultation.
The commission said the relaxation was also aimed at helping onshore fund managers better compete with their foreign rivals.
Since May 2004, the government has permitted offshore mutual funds to raise money in Taiwan for investment in overseas stock markets, including China. In February last year, the commission raised the investment ceiling by onshore fund managers in Chinese securities to 30 percent of their net value from 10 percent.
The commission said the latest regulatory easing is part of its plan to develop a financial platform for cross-strait financial services and allow Taiwanese investors to exploit China’s fast-growing economy, although there are concerns that further relaxation would lead to a massive capital outflow and negatively affect the local stock market.
Under Chinese regulations, Taiwanese investment trust companies must first secure a qualified foreign institutional investor (QFII) license from the China Securities Regulatory Commission and then wait for an investment quota from China’s State Administration of Foreign Exchange before they can invest directly in Chinese securities, including A-shares, corporate bonds and bank debentures.
Taiwanese onshore fund companies that have gained QFII licenses and the requisite investment quota include Fubon Asset Management Co (富邦投信), Cathay Securities Investment Trust (國泰投信), Capital Securities Investment Trust Co (群益投信), Fuh Hwa Securities Investment Trust Co (復華投信), Prudential Financial Securities Investment Trust Enterprise Co (保德信投信) and Yuanta Polaris Securities Investment Trust Co (元大寶來投信).