Taiwan is considering easing more rules on structured products as it vies with Singapore and Hong Kong to woo wealthy Chinese investors.
The Financial Supervisory Commission allowed the securities to be linked to gold last week, in a bid to catch up with Singapore and Hong Kong, which permit such notes, according to the commission’s head secretary, Sherri Chuang (莊秀媛).
“Hong Kong and Singapore are similar to us in geography and size and they are our competitors in terms of financial development,” Chuang said on Thursday last week. “We will, as much as we can, compare with the two cities to see on which products we are not as open.”
The steps come as competition mounts to manage Asia’s growing wealth.
Structured products can offer higher yields than deposits and are commonly sold by private banks to wealthy clients.
The number of millionaires in China is set to almost double in the next five years, according to a report released by Credit Suisse Group AG on Tuesday.
China is to surpass Japan to become the second-most affluent country after the US in terms of individuals’ aggregate wealth by 2019, the report said.
The commission is aiming for a slice of China’s growing wealth by considering allowing offshore structured notes to be linked to Taiwanese underlying assets, Chuang said.
“We think about what Chinese tourists like and what we can offer here that is different from in China, besides Taiwan’s pineapple tarts,” Chuang said. “Do they want their wealth in China to be diversified overseas? Or for their funds that are already overseas, what kind of products will attract them here? The answer will be Taiwanese stocks.”
Offshore structured notes, which are securities sold by foreign banks in Taiwan, are currently not allowed to be linked to Taiwanese equities.
Asian nations that have loosened regulations on the investments include Thailand, which allowed sales of structured notes denominated in foreign currencies in August. India authorized banks to sell the products overseas at established financial centers without approval in May.
Increasing product diversity is also important for Taiwan to encourage domestic investors to keep funds on the island, after a lack of options led to people seeking private-banking services overseas, according to Chuang.
“We estimate that there is a potential to attract [US]$100 billion of our assets that went overseas back to Taiwan,” she said.
Becoming a private banking hub “is a goal, albeit an ambitious one,” she said.
In a survey by Julius Baer Group Ltd and Bank of China Ltd (中國銀行) on 200 of the Chinese bank’s onshore private banking clients, structured products, funds and real estate were chosen as the most popular instruments used to meet their investment objectives.
For structured products, capital protection with a fixed return was the most attractive feature, according to the survey.
For the next 12 months, respondents said they would continue to be interested in the structured securities while indicating declining interest in property, it said.
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