Taiwan will retain its "advanced emerging" status in the Financial Times Stock Exchange Group's (FTSE) latest annual review because it fell short of the requirements for "developed" status.
FTSE Group, which classifies markets into three categories -- developed, advanced emerging and secondary emerging -- has included Taiwan into its watch list for review since 2004.
But the country saw its hopes dashed this time because of deficiencies in terms of the ease, cost and security of investments made by international investors.
"Taiwan will continue to be assessed for promotion from advanced emerging to developed status," FTSE said yesterday.
"Whilst FTSE and investors are pleased to recognize that the exchange and regulator have made significant improvements, market access remains restricted to international investors in four critical areas," it said.
FTSE said Taiwan needs to have a free and well developed foreign exchange market and must establish a liquid stock lending market.
It also said payment delivery for transferring securities between accounts and off-exchange transactions should be free of charge.
"This is a bit disappointing, but its impact on local stocks is rather limited as investors had no advance expectations for the change," Alex Huang (黃國偉), vice assistant president at Mega Securities Corp (兆豐證券), said in a telephone interview yesterday.
"The investors' focus is on the central bank's possible monetary policy move and on local companies' earnings reports," he said.
The TAIEX closed up 56.65 points, or 0.63 percent, at 8,983.03 yesterday.
It climbed higher at the opening, boosted by a rally in global equities following the US Federal Reserve's decision to cut interest rates on Tuesday.
But shares edged down gradually from late morning due to profit-taking, as investors adjusted their positions ahead of next week's holidays, Huang said.
Financial markets will be closed on Monday and Tuesday for the Mid-Autumn Festival.
Huang said an upgrading, however, was needed because in the long-term view this would bring a sizable investment from European investors.
An amount between US$2 trillion to US$2.5 trillion of funds track FTSE Indexes. Of this amount, approximately 95 percent is linked to developed markets, Huang said.
South Korea's "advanced emerging" status remains unchanged as well, FTSE said.
"Markets on the watch list have made very significant changes to their regulations and investment procedures and systems to assist international investors to invest in their markets and are to be congratulated on the progress made," FTSE chief executive Mark Makepeace said.
"I hope that these markets will remain engaged in this process and that further markets that are close to achieving Developed status achieve this goal at the next annual review in September 2008," he said.
China's A-share remains on the watch list for possible inclusion in the FTSE Global Equity Index Series, it said.
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