The establishment of an offshore stock exchange market could be another way for China-based Taiwanese companies to issue shares in the market at home before the relaxation of current regulations takes effect, pundits said yesterday at a forum in Taipei.
"[The authorities] should provide a way for China-based Taiwanese companies to be able to come back to their home [market]," Daniel Chu (朱竹元), executive vice president of underwriting at Fubon Securities Co (富邦證券) said at the forum held by Asiamoney, a Hong Kong-based financial magazine.
Taiwanese companies investing in other foreign countries are allowed to raise funds on the nation's bourse while those in the Chinese market can not, Chu said.
Another panelist, Lisa Huang (黃麗華), who is executive vice president of capital markets at Taiwan Securities (台証證券), suggested that companies trade shares in US dollars on the proposed offshore stock exchange market.
As one of the world's most rapidly expanding emerging markets, China has drawn a significant amount of Taiwanese investment there. During the first seven months of the year, Taiwanese companies invested about US$3.77 billion in China, compared to US$1.64 billion of investment elsewhere.
To help expand their businesses in China, many Taiwanese companies want to trade shares in Taiwan, but the issue has raised concerns. The government argues that allowing China-based Taiwanese businesses to list on the stock market here may prompt more Taiwanese money to flow across the Taiwan Strait.
Huang said the proposed offshore stock exchange market may allow Taiwanese companies to circumvent the current regulations.
Taiwanese companies are barred by law from raising money by listing their shares here if they have invested more than 40 percent of their total net worth in China. The government said it is considering relaxing the restriction level of 40 percent. Financial regulators seem to have different views about the proposal that the industry veterans put forth.
"It is a creative and alternative idea but its feasibility remains questionable," Lu Tung-ying (呂東英), a member of the newly-established Financial Supervisory Commission, said in a phone interview. Switzerland has set up such a foreign exchange board mechanism for the absorption of the abundant foreign currency savings of the nation's wealth, Lu said.
But it would remain questionable if investors could trust in China-based Taiwanese companies listed on the foreign exchange board, he added.
"Transparency is a significant issue," Lu said.
For the time being, the commission has no plan to change the current law regarding the share sale of China-based Taiwanese businesses, but a solution to the issue would become clear in the spring of next year, Lu said.
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