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Stock market to open to Chinese firms

The government yesterday opened the stock and futures markets to Qualified Domestic Institutional Investors (QDII) from China, approving investment of up to 3 percent of a QDII’s net worth or a maximum of NT$7.2 billion (US$214.56 million).

The opening shows the government’s resolve to move toward an internationalized financial market, Financial Supervisory Commission (FSC) Vice Chairman Lee Jih-chu (李紀珠) told a press conference after the Cabinet’s weekly meeting yesterday.

The policy symbolizes Taiwan’s determination to become a fund-raising hub in the Asia-Pacific region, Lee said, adding that the change would benefit Taiwan’s markets, especially after the global economy recovers.

Lee said China had approved 10 QDIIs, most of which invest in Hong Kong shares totaling NT$240 billion as of last month.

In the absence of a memorandum of understanding with China, these 10 QDIIs may still allocate 3 percent of their assets, or a maximum of NT$7.2 billion, in local shares, she said.

Lee said the Cabinet would soon deliver the approved QDII plan to the Taiwan Stock Exchange and GRETAI Securities Market, which will make the plan public for three days before allowing QDIIs from China to open accounts for share investment.

To address concerns over potential problems caused by Chinese investment in the stock market, the commission will impose restrictions on QDIIs, which will be treated like foreign investors in most ways, Lee told another media briefing yesterday.

Lee said Chinese QDIIs would not be allowed to invest in over-the-counter derivatives products or equities in the Emerging Stock Market, or to trade stocks on credit.

Chinese QDIIs will also not be allowed to buy more than 10 percent of a company’s shares without obtaining permission from government agencies.

“In industries like aviation and banking, the economics ministry’s investment commission will soon come up with a cap that is tighter than 10 percent,” Lee said.

The FSC will soon set a ceiling for investment in the local equities market, she said.

Meanwhile, the government said it would allow Chinese employees of local businesses and Chinese shareholders of international enterprises to possess allotted shares of listed companies.

Lee said that allowing Chinese employees of companies listed in Taiwan to possess shares would help companies recruit talent.

Chinese employees would be allowed to sell the bonus shares they receive from their companies, but would not be allowed to purchase other shares on the stock markets, she said.

Allowing Chinese shareholders of international enterprisers to own shares of companies listed on the local stock markets would encourage a return of Taiwanese capital from China and attract more foreign enterprises, she said.

Additional reporting by agencies
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