The nation's financial regulator said yesterday that it was considering allowing Taiwanese companies listed in Hong Kong to go for a secondary public offering in the local exchange.
The Financial Supervisory Commission's (FSC) comment came in the wake of speculation that the US-based Carlyle Group's offer last week to buy out Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) was designed to help the world's largest chip-testing and packaging company circumvent government restrictions on investing in China.
"Advanced Semiconductor Engineering Inc's case indicates the needs to review some restrictions on cross-strait investment," commission Chairman Shih Jun-ji (
Shih said that the commission was looking into giving the green light to Taiwanese firms listed on the Hong Kong Stock Exchange to raise funds by issuing Taiwan depositary receipts (TDR) on the local exchange.
Taiwan currently allows companies listed in 18 stock exchanges worldwide that have a memorandum of understanding with the country, such as New York and Singapore, to issue TDRs on the Taiwan Stock Exchange (TSE). Hong Kong is not included.
The financial regulator may allow local retail investors to invest in Hong Kong's stock market as a reciprocal support measure, Shih said.
In addition, the commission may allow Taiwanese public traded firms to allocate more funds raised overseas through the issuance of American/global depositary receipts or convertible bonds for investment in China, Shih said.
Current regulations cap Tai-wanese companies' investment in China at 20 percent to 40 percent of funds raised overseas.
The regulator may also exempt foreign companies that list on the TSE from the restriction that caps China-bound investment at 40 percent of a company's net worth, he added.
Shih conceded for the first time that lifting the ceiling on China-bound investment, currently capped at 40 percent of a local company's net worth, was an option.
Shih did not elaborate on the details of these proposed measures, saying that his ideas still await inter-department discussion.
In response to Shih's com-ments on TDR issuance, a fund manager said that the government should more actively pursue cross-strait opening measures.
"The plan may not be effective and attractive to Taiwanese firms in need of money as the regulator expects, considering the less attractive valuation of the local market compared to that of Hong Kong," said Bevan Yeh (
TDR's are also less liquid, Yeh said, adding that the government should prioritize opening up cross-strait investment and allow local companies to invest in more advanced process technology in China.
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