Taiwan’s Stocks Climb Most Since 2013 on China Equity Link Bets

Taiwan’s stocks rallied the most in nearly two years as financial companies jumped on speculation the island will broaden access to China’s capital markets.

The benchmark Taiex index climbed 1.9 percent to 9,797.49 at the close in Taipei, completing its biggest advance since July 2013. A gauge of banks, brokerages and insurers surged 4.7 percent, the most since December 2011. Cathay Financial Holding Co. and Fubon Financial Holding Co., the island’s two biggest lenders by market capitalization, advanced at least 4.7 percent.

China’s securities regulator is studying setting up a stock-trading link between Shanghai and Taipei, the Economic Daily News reported Wednesday, while Taiwan’s government said it will open a cross-border stock trading platform with Singapore on July 1. Hong Kong’s benchmark equity gauge has jumped 17 percent amid record turnover since a link with Shanghai began in November.

“A flurry of news opening up the possibility of stock links with other bourses is reminding investors that financial stocks in Taiwan are undervalued,” said Parker Wu, a portfolio manager at Agriculture Bank of Taiwan in Taipei. “This will be short-lived. It takes time until we see the actual execution of the plans and Taiwan’s political community could be a hurdle.”

Taiwan isn’t conducting any study on a stock trading link with Shanghai, Financial Supervisory Commission Minister Tseng Ming-chung said Wednesday. The minister said he didn’t see “even a shadow” of a Taiwan-Shanghai link, according to a live broadcast on Unique television Thursday.

‘Question Mark’

Fubon Financial jumped 6.9 percent. Its asset management unit received an extra $550 million in quota last month to buy mainland stocks through China’s Qualified Foreign Institutional Investor program. Taiwan’s financial stock index trades at 12 times projected 12-month earnings, compared with its five-year average of 13.3.

China will allow Taiwanese financial firms to invest in mainland capital markets under a quota-based system, China Securities Regulatory Commission Vice Chairman Jiang Yang said Wednesday.

“The trigger is the plan for a stock connect with Shanghai,” Eric Shih, a Taipei-based analyst at KGI Securities Co. “There is a big question mark on when it will be implemented. But traders want to build early positions in financial stocks beforehand as turnover will soar as shown in the stock connect with Hong Kong.”

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