The nation's financial regulator is considering allowing local retail investors to invest in the planned, foreign currency-denominated "offshore bourse" from the start, as it will help to quickly build up market liquidity and make the bourse more attractive to foreign funds, a high-ranking official said yesterday.
"Our internal discussions and related government agencies have suggested letting local individual investors join in the offshore stock exchange as soon as it opens, because of liquidity concerns," Financial Supervisory Commission chairman Kong Jaw-sheng (龔照勝) said on the sidelines of a question and answer session at the Finance Committee of the Legislative Yuan yesterday.
Increased market liquidity would help lure top overseas investors to pour funds into the planned bourse, Kong said, adding that a survey by consultancy McKinsey & Co had already demonstrated how much investment is likely.
McKinsey & Co, which was commissioned to survey market opinion regarding the proposed international bourse, reportedly predicted between US$40 billion and US$56 billion worth of local capital would be injected into the bourse.
The offshore stock exchange is targeting joint companies or joint ventures established outside the territory by overseas Chinese and foreigners that specialize in either traditional or high-tech industries with development potential, as these would generate interest among local investors, according to the consultancy.
The planned US dollar-denominated bourse will include a bond market, a futures exchange and a stock market. The bond and futures markets are expected to be launched in the first quarter of next year at the latest, while the stock market could open during the second half of next year, the commission said earlier this year.
The proposal to allow domestic retail investors to participate in trading on the offshore bourse will expand the scale of the domestic securities market, rather than shrink the number of transactions on the main bourse, the Taiwan Stock Exchange, Kong said.
Kong also hinted that the planned measure could help retain capital within the territory under the current foreign exchange policy. At present, each individual is allowed to transfer up to US$5 million abroad, he said.
The planned measure, however, is still awaiting further review and has not yet been finalized, Kong added.
Kong made the remarks after Chinese-language news reports said yesterday that the commission planned to give the green light for investment in the offshore bourse to retail investors as soon as it is inaugurated next year.
Originally, the financial regulator had planned to wait at least six months before allowing retail investors to participate in the offshore bourse, the reports said.
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