Fri, Dec 31, 2004 page10

• TSE to ease restrictions on trading

  REGULATIONS The stock exchange hopes that a relaxation of rules in areas such as stock lending will help it achieve `developed market status' next year

  • By Lisa Wang / STAFF REPORTER
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  The nation's stock regulator said yesterday that it plans to further relax trading restrictions in the next six months as part of the government's efforts to lure more overseas investors to Taiwan's stock markets.

  The Taiwan Stock Exchange hoped the eased measures will help lift the nation to "developed market status" in the FTSE global equity index, said Wu Nai-jen (吳乃仁), chairman of the exchange.

  FTSE International Ltd is scheduled to conduct its annual country-classification examination in September of next year.

  Wu said the status upgrade, if realized, will attract more foreign funds into local stock markets, as most investors adjust their portfolio based on FTSE's country classifications.

  Taiwan, currently classified as an advanced emerging market, is on the FTSE's watch list for possible promotion to developed market status, along with South Korea.

  "To meet the criteria and to meet the anticipation of international investors, we have to loosen current stock-transaction restrictions to a certain degree," Wu said.

  Stock Lending

  At the top of the exchange's priorities for next year is a plan to loosen restrictions on stock lending, a long-term concern of foreign institutional investors, according to Wu.

  Stock lending is defined as the temporary transfer of securities, by a lender to a borrower, with the borrower agreeing to return equivalent securities to the lender at a pre-agreed time, according to the British Bankers' Association Web site.

  In Taiwan, institutional investors are now required to provide collateral to gain approval for stock lending for hedging purposes, a practice not seen in most developed markets.

  "We hope the job will be done within the next six months to make it in time [for the review]," Wu said.

  Large Transactions

  As part of the relaxation, the regulator also plans to lift the restriction on large-volume transactions -- those exceeding 500,000 stocks -- during regular trading hours, the exchange's president Chen Ming-tai (陳銘泰) said.

  Moreover, the exchange will also work to scrap a ban on shares being sold at prices lower than their latest closing price, Chen said.

  Taiwan in late 1998 banned investors from selling borrowed shares at a price lower than the previous day's close, in a bid to stabilize the market.

  George Wu (吳裕良), who manages the equivalent of US$31 million for Invesco Taiwan Ltd (景順投信) in Taipei, reacted positively to the plan.

  "Taiwan is on the right track toward developed-market [status] and this will bring more foreign fund flows to the bourse, as foreign investors will increase their local share position in response to a higher weighting in the FTSE," Wu said.

  Aside from the relaxation, the exchange will also increase its examination of the financial results of companies traded on the Taiwan Stock Exchange, in the wake of a string of financial scandals led by chipmaker Procomp Informatics Co (博達科技) this year.

  "To avoid similar scandals, there will be more stringent oversight rules starting next year," Chen said.

  Regular checks of financial reports will increase sharply to 23 percent of the 697 listed companies, from the current 16 percent, Chen said.
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