Fubon Financial Holding Co (富邦金控) and Capital Group (群益集團) will be allowed to invest directly in Chinese securities, giving Taiwanese investors access to a stock market that is almost four times bigger than the local bourse.
The securities units of the two Taipei-based firms were granted licenses under China’s Qualified Foreign Institutional Investor (QFII) program, according to a statement from the China Securities Regulatory Commission (CSRC).
The benchmark Shanghai Composite Index jumped 12 percent last month, the most among the major indexes tracked globally by Bloomberg, while Taiwan’s benchmark TAIEX index gained 0.6 percent.
“This is significant as it symbolizes further liberalization of the financial sectors for Taiwan and China,” said Alan Ho (何燿廷), a fund manager at Union Securities Investment Trust Co (聯邦投信), who helps oversee NT$40 billion (US$1.3 billion). “Taiwan investors may have more opportunities to invest in China stocks in the future.”
Fubon shares gained 0.8 percent to NT$38.35, the highest since Oct. 7, while Capital Securities Corp (群益證券), the listed unit of Capital Group, dropped 0.7 percent at the close of Taipei trading yesterday.
Taiwan and China in November last year signed three memorandums of understanding to ease restrictions on investments in each other’s banks, brokerages and insurers, and in June agreed on the Economic Cooperation Framework Agreement (ECFA), aimed at reducing tariffs on trade and widening access to each other’s markets.
Fubon Financial is awaiting an investment quota from China’s State Administration of Foreign Exchange (SAFE) and plans to invest in yuan-denominated A-shares and issue A-share funds, company president Victor Kung (龔天行) said yesterday. Foreign investors need to obtain an investment quota from SAFE before starting to invest.
Cathay Financial Holdings Co (國泰金控) applied to invest in Chinese securities in September as a QFII, Alan Lee (李偉正), chief senior executive vice president at Cathay United Bank (國泰世華銀行), a unit of Taiwan’s largest listed financial services company, said on Monday. It will help increase returns and diversify US and Europe holdings, Lee said.
“The relaxation of this rule is good for Taiwan politically as it shows China is opening another door to the island,” Monika Yang, who helps oversee almost US$2 billion at Hamon Asset Management Ltd in Hong Kong, said by phone. “However, I won’t expect the shares to soar because of this, as there are other QFIIs allowed in China. This is just making it a level playing field for Taiwan.”
Beijing-based CSRC also said it’s revising its regulations for the nation’s Qualified Domestic Institutional Investor (QDII) scheme to “facilitate” investments in Taiwan’s financial derivatives products.
Taiwan in January issued rules to allow firms approved under China’s QDII to invest up to US$500 million in shares listed on the nation’s bourses.
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