TT: If Taiwan's fund industry is so vulnerable, how can it be improved?
Lue: There are two perspectives, one is from the government, and the other one is the fund industry. First, the government should change its view on foreign investment by domestic investors. An interesting aspect is that although Taiwan's government has been discouraging local investors to hold assets in foreign currencies for decades, they have failed. One major reason is that the political uncertainty between China and Taiwan has motivated local investors to hold handsome assets in US dollars or other currencies.
Last year when Taiwan stock market collapsed, as much as US$10 billion moved to overseas market through fund investments, as mentioned earlier. The government should realize that deregulation and liberalization is the best way to manage capital flow, almost all the effort to control capital flow would be in vain, just like the "no haste, be patient" (
Secondly, the local fund industry should diversify their products into international equity and bond markets as soon as possible in order to cope with Taiwan's entry into WTO. One of the ways is to invite investment advisor to assist them to develop overseas investment vehicles. Another way is to have a joint venture with foreign partners. Both ways could provide know-how to the domestic fund industry and improve their competitiveness in the coming decades. Without diversification, many fund companies will not survive when foreign competitors flood the market.
TT: What's your view on the over-banking problem in Taiwan?
Lue: Taiwan's banking industry is currently in a merger trend. From the point of view of equity-value's fundamental analysis, companies have to be evaluated by their growth and management. It means that unless the banks close down their unproductive branches, lay off redundant staff and reorganize their businesses after the merger has taken place, it will be meaningless to have merged in the first place.
The authorities must change their attitude on the lay-off issue or else the competitiveness of the banking industry will hardly be improved. The only thing I can see for now is they are trying to get rid of the bad loans through merging small banks with big banks and shift the problem to the big banks.
TT: Baring Asset Management held its 2001 Taipei road show last week, could you give us a summary of its prospective on the global market for this year?
Lue: Although the economic growth will slow down this year, we do not expect an economic recession, especially when the US is taking the loose monetary policy of Federal Reserve Chairman Alan Greenspan.
Therefore, we are still upbeat about investing in a number of stock markets. We are quite positive with regards to the Asian market, especially Northern Asian markets like China, Hong Kong and Taiwan, but Japan is not recommended.
From the global assets allocation, we are positive on stock markets including Southeast Asia and Australia, the UK and emerging markets.
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