Chen renews financial reform commitment

President Chen Shui-bian (陳水扁) said yesterday that government interference in and regulation of capital markets should be kept to the minimal in order for the market to fully develop its potential.

Chen made the comments when he attended the Asia Pacific Fund Management Summit 2001 held yesterday in Taipei.

Chen also stressed that the administration is determined to push ahead with financial reforms, saying he believes that in a year or two, the administration will see satisfactory results.

Chen also said that when Taiwan business has gradually become a integrator of global and Asian investments. The task for the administration is to promote Taiwan's capital market toward internationalization and liberalization. It's to make Taiwan one of the important asset management center in the Asian Pacific region. He added that global investors should be made aware of the robust, strong competitiveness of Taiwan's industry and would be willing to invest their capital in Taiwan's market.

According to one punditt, with proper deregulation, Taiwan's fund management market growth potential is great.

"If we use the US as a benchmark, Taiwan's fund management market could grow seven-fold from present levels," said Stuart Fross, a senior vice president of research and development, Fidelity Investment.

The fund management or asset management market is an important sector of capital market. The sector includes mainly mutual fund and pension fund management. Floss, using the percentage of fund assets against GDP, concluded that Taiwan could have an asset management market with US$212 billion, which is more than seven times than its current market size.

"With that kind of market size, the industry could generate US$4 billion in revenues a year, and it could significantly improve the service quality of Taiwan's capital market, such as finding more-promising industries and companies to invest in," said Fross.

However, whether Taiwan's fund management market will continue a two decade long growth trend is questionable.

"The fund management grew fast from 1985 until three years ago," said Henry Lin (林弘立), convener of the Securities Investment Trust Committee, Securities Investment Trust & Consulting Association of ROC. "The market stagnated in the past two and three years, especially in equities fund sector. One of the factors could be the performance of local stock market."

Academics commenting on Chen's remarks also stressed the importance of deregulation. Varying legal treatment for various sectors and aspects of an industry can pose problems, they said.

"The local funds management industry complains that the administration currently does not allow them to issue equities on funds invested in overseas markets," Lin said. "Meanwhile, foreigners can sell this type of equity freely in Taiwan. This is discrimination against our own citizens."