There is no point in creating a new “T-share” segment in the stock market if the government tries to boost flagging stock turnover by simply bumping up stock listings. Investors are losing interest in the stock market, not for lack of choices, but because of rising costs.
Stock investors are moving to the sidelines as they calculate whether they can create any payback on their investments in local stocks after paying the newly announced stock gain tax, plus an imminent 2 percent extra payment from annual dividend incomes, which the government plans to use to save the crumbling public health insurance system.
The extra healthcare premium policy pushed stock turnover down 36 percent to NT$56.69 billion (US$1.94 billion) on Oct. 1, the first day of trading following the policy announcement by the Department of Health on Sept. 29. Though the new policy will only affect retail investors, it has dealt a blow to investor confidence as a whole.
The stock market suffered its fourth straight losing week on Friday, down 3.3 percent from the previous week with turnover of NT$66.6 billion, well below the “healthy” level of NT$100 billion.
The stock market has also been under pressure from a struggling global economy and poor corporate earnings reports.
On Thursday, Premier Sean Chen (陳冲) said the government was studying all possible approaches to refuel investor’s appetite for the stock market.
One option for the government could be to encourage Chinese corporations to launch initial public offerings (IPOs) as “T-shares” on the stock market.
The “T-shares” would be similar to “H-shares” traded on the Hong Kong stock market, also known as the Hang Seng China Enterprises Index. Many of China’s big companies and primarily state-run enterprises trade their shares on stock markets in both Hong Kong and China.
The government has said that the creation of a “T-share” subgroup could attract large-scale Chinese enterprises like China Mobile to list their stocks on the bourse, which would in turn help push up turnover. No details about the trading terms for “T-shares” were disclosed.
In general, the “T-share” segment is identical to the existing “F-shares” trading mechanisms and Taiwan Depositary Receipts (TDR). Foreign companies trade their shares under the “F-share” group, while Taiwanese firms with overseas operations float their shares here by issuing TDRs. “T-shares” are similar to TDRs. The only difference is that “T-shares” target Chinese firms, rather than Taiwanese firms, as TDRs do.
However, TDR trading has been in the doldrums for some time as most TDRs are issued by small and medium-sized companies, which are unable to compete with blue-chip stocks for investors attention.
As the Taiwanese stock market is considered less global than its Hong Kong counterpart in scale and trading regulations, it is doubtful that Taiwan will appeal to big Chinese firms looking to raise funds via an IPO. Instead, Taiwan could attract smaller firms to list shares.
As such, it is not a convincing argument to say that “T-shares” will do any better than TDRs.
Besides, there is a wide selection of blue-chip Taiwanese companies for investors to pick from on Taiwan’s main bourse. There is no reason for investors to risk their money on smaller companies with less financial transparency for uncertain returns.
To heal the stock market, the government should look into the real problems it faces and reduce investors’ cost burdens to allow reasonable profits.
One possible solution would be cutting the existing 3 percent stock transaction tax. Like the old saying goes: “It’s the profits rather than the risks that count.”