Taiwan Boosts Limit on China Securities Investment to $1B

Taiwan will double the limit on mainland Chinese institutions’ securities investments in its market as the cross-strait economic relationship deepens. Brokerage shares advanced in Taipei.

Maximum inbound investment from China will be increased to $1 billion from $500 million, according to Huang Tien-mu, Taiwan’s securities regulator. He spoke after a meeting yesterday between Guo Shuqing, chairman of the China Securities Regulatory Commission, and Taiwan’s top market regulator, Chen Yuh-chang, in Taipei.

The increased scope for investment from China coincides with Taiwan’s central bank allowing domestic lenders to conduct yuan business and as the island’s tourism bureau doubles the quota for mainland visitors. Financial market regulators on both sides of the Taiwan Strait signed a non-binding cooperation agreement in 2009.

“The easing of rules will be a new growth driver for brokerages in the long term,” Parker Wu, who helps oversee the equivalent of $98 million at the Agricultural Bank of Taiwan, said by phone today. “This is just the beginning. We look forward to more and more interaction which brings fund flows.”

Brokerage shares rose in Taipei trading after the announcement. Yuanta Financial Holding Co., which owned the biggest brokerage by trading value for the month of December, rose 3.9 percent to NT$15.90 at 12:17 p.m. local time, heading for the highest close since March 28. Capital Securities Corp advanced 5 percent, the most in more than two months.

QFII Rules

China may relax minimum management asset requirements for Taiwan brokerages seeking quotas under the Qualified Foreign Institutional Investment program, CSRC Director General of International Affairs Tong Daochi told reporters in Taipei. Funds from outside China invest in the country’s capital markets through the QFII program.

Taiwan insurers such as Nan Shan Life Insurance Co., Fubon Life Insurance Co. and Cathay Life Insurance Co. are among 207 approved QFIIs that have access to mainland stocks.

The CSRC is also considering a pilot program in Taiwan of the Renminbi Qualified Foreign Institutional Investor, or RQFII, which allows for the repatriation of offshore yuan, Tong said. It may raise the total RQFII quota by 100 billion yuan ($16.1 billion) for use in Taiwan, according to Tong.

The Bank of New York Mellon Taiwan ADR Index, which tracks American depositary receipts of Taiwanese companies traded in New York, climbed 1 percent to 244.02, its steepest one-day advance since Jan. 17. The ADR index has rallied 30 percent from a July 23 low.

Joint-Venture Trial

China will start a trial allowing Taiwan brokerages to hold controlling stakes in investment-consulting joint ventures in pilot areas, Taiwan’s Financial Supervisory Commission said in a statement yesterday after the meeting. Tong earlier identified those areas as Fujian province and the cities of Shanghai and Shenzhen.

Taiwan futures companies will also be allowed to set up joint ventures on the mainland and the island’s securities companies can hold controlling stakes in fund companies, the FSC said. Taiwan may ease rules to allow mainland securities and futures firms to invest in their counterparts on the island.

Chinese regulators loosened restrictions on foreign-invested joint ventures in 2012, allowing institutions to hold as much as 49 percent of a joint venture, up from 33 percent.

The cross-strait neighbors, divided since Chiang Kai-shek’s Kuomintang government fled from Mao Zedong’s communist forces in 1949, signed a yuan-clearing agreement in August, allowing for deposits and trading in the currency outside of China.

Taiwanese government bonds handed investors a 2.8 percent return in 2012, compared with 3 percent for Chinese onshore sovereign notes and 5.3 percent for Dim Sum debt, data compiled by HSBC Holdings Plc show.

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