China Draws Taiwan Into Economic Embrace With Trade Pact
Taiwan’s Fubon, Capital Get China Investment Approval
Maurice Tsai/Bloomberg
Pedestrians walk past the YanJi branch of Fubon Financial Holding Co. in Taipei.
Pedestrians walk past the YanJi branch of Fubon Financial Holding Co. in Taipei. Photographer: Maurice Tsai/Bloomberg
June 28 (Bloomberg) -- Kenneth DeWoskin, a director of Deloitte LLP's China Research and Insight Center, talks with Bloomberg's Rishaad Salamat about trade negotiations between China and Taiwan. Taiwan and China aim to sign three agreements in a sixth round of cross-strait talks that will be held later this year, Chiang Pin-kung, chairman of the Taipei-based Straits Exchange Foundation, said. Cross-strait negotiations resumed in 2008 after a nine-year halt during which former Taiwan president Lee Teng-hui described the talks as "state-to-state," a term Beijing rejected. China claims the self-ruled island as its territory and has threatened force to impose Taiwan’s unification with the mainland. (Source: Bloomberg)
Taiwan’s Fubon, Capital Get China Investment Approval
Maurice Tsai/Bloomberg
Pedestrians walk past the AnHe branch of Fubon Financial Holding Co. in Taipei.
Pedestrians walk past the AnHe branch of Fubon Financial Holding Co. in Taipei. Photographer: Maurice Tsai/Bloomberg
Fubon Financial Holding Co. and Capital Group 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 island’s bourse.
The securities units of the two Taipei-based firms were granted licenses under China’s Qualified Foreign Institutional Investor program, according to a statement from the China Securities Regulatory Commission.
The benchmark Shanghai Composite Index jumped 12 percent in October, the most among the major indexes tracked globally by Bloomberg, while Taiwan’s benchmark Taiex index gained 0.6 percent. Taiwan President Ma Ying-jeou has abandoned his predecessor’s pro-independence stance and made economic relations with China, which considers the island part of its territory, the priority of his administration.
“This is significant as it symbolizes further liberalization of the financial sectors for Taiwan and China,” said Alan Ho, a fund manager at Union Securities Investment Trust Co. in Taipei, who helps oversee NT$40 billion ($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., the listed unit of Capital Group, dropped 0.7 percent at the close of Taipei trading today.
Diversifying
Taiwan and China, separated by the Taiwan Strait, 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 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 and plans to invest in yuan-denominated A-shares and issue A-share funds, company President Victor Kung said in Taipei today. Foreign investors need to obtain an investment quota from SAFE before starting to invest.
“This will attract more capital inflows for them and may boost operating profit” at Taiwanese securities firms, said Parker Wu, a fund manager at the Agriculture Bank of Taiwan, who helps oversee the equivalent of $95 million.
Cathay Financial Holding Co. applied to invest in Chinese securities in September as a qualified foreign institutional investor, Alan Lee, chief senior executive vice president at Cathay United Bank, a unit of Taiwan’s largest listed financial services company, said yesterday. It will help increase returns and diversify U.S. and Europe holdings, Lee said.
Level-Playing Field
“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 $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 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 $500 million in shares listed on the island’s bourses.
To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net
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