Unlisted shares to start trading Jan. 2

Taiwan will launch a trading board for unlisted shares starting next year, the first in the four decade history of Taiwan's securities market.

Previously the government turned a blind eye to the "gray" market and forbid any legitimate securities company from dealing in unlisted shares. The government has been developing the trading mechanism for the past two years.

"The unlisted securities market will definitely be launched on Jan. 2, 2002," said Chu Jaw-chyuan (朱兆銓), chairman of Securities and Futures Commission (證期會), in a hearing conducted in the Legislative Yuan, Chinese-language media reported yesterday.

Interest in the new market is small.

"More than 80 companies have applied for trading in the unlisted market," said Chou Kang-chi (周康記), vice president of the TAISDAQ (櫃檯買賣中心).

Yet getting on the board is easy.

"Unlike the TAISDAQ, there is no minimum capital requirement for companies to trade on the unlisted market."

A telecom company with capital of around NT$3.6 billion will top new listings, Chou said. Following the launch of trading, about 30 integrated securities companies will deal in the unlisted shares. As many as 70 percent of the companies that have applied for trading on the unlisted board are in the high-tech sector, Chou said.

The TAISDAQ -- the market for over-the-counter shares -- will be in charge of overseeing trading on the unlisted board.

According to Chou, the trading hours for unlisted shares will be from 9am to 3pm. The trading price will be negotiated between securities companies on behalf of buyers and sellers. In contrast with listed shares -- which have a 7 percent limit both on the upside and downside -- there will be no limit on the daily movement of share prices. Investors will be able to buy and sell unlisted shares through their current brokerage accounts, but no margin trading will be allowed. In addition, the Securities and Futures Commission has said qualified foreign institutional investors will be eligible to trade in unlisted shares.

But whether the unlisted market will be able to attract foreign investors remains to be seen, a securities analyst said.

"Whether foreign institutional investors would be interested in [Taiwan's] unlisted shares would be on a case-by-case basis," said Neal Stovicek, an analyst at National Securities Co (建弘證券).

"However, since the [unlisted] market has not been launched yet, there is no historical trading record and it would be hard to evaluate its attractiveness to foreign investors at its current stage," Stovicek said.

Normally unlisted companies pose more investment risk than listed shares because unlisted companies do not have to disclose their financial status and operations.