Friday, September 17, 2010

Taiwan bourse set to be new funding hub in Asia

TAIPEI: Taiwan's stock exchange looks set to become a sought-after destination for share listings by overseas and Chinese firms and notch up its ranking in Asia after rising popularity of Taiwan depositary receipts (TDRs) listings, according to a Reuters report on Friday, Sept 17.

Singapore-listed Chinese shipbuilder Yangzijiang's TDRs made a strong debut last Wednesday and have risen nearly 30 percent since then, boosting confidence among other companies to go public in Taiwan.

Several other Chinese firms, including Singapore-listed Ziwo Holdings, are in the pipeline to capitalise on higher valuations in Taiwan, where many companies price TDRs at a premium to their Hong Kong or Singapore shares.

A landmark trade deal with China that will deepen economic ties, along with a deep local pool of cash-rich institutions and individuals and the premium that China-related shares attract, make the bourse attractive for either primary or TDRs listings.

"Liquidity in the market is ample and investors can participate in China growth. That's a very good selling point," said Andrew Deng, assistant vice president at Taiwan International Securities.

"The TDR effect will be seen and if sizeable companies, especially state-owned enterprises, can come to Taiwan, chances are high Taiwan's bourse can overtake South Korea's in size in the next three to five years."


Taiwan's bourse has a market capitalisation of some $679 billion, ahead of Singapore's $668 billion and just below the $797 billion of South Korea. But it is well behind the $3 trillion of Hong Kong and the $2.7 trillion of Shanghai.

With China taking the global No.1 spot this year for IPOs, Hong Kong still pre-eminent as a fund-raising centre and the Singapore exchange looking to grow by allowing trading of American Depositary Receipts (ADRs), Taiwan's bourse is seeking to ensure it does not fall behind.

"Our strategy is doing things step by step," said Stanley Chu, a vice president at the Taiwan stock exchange. "We've seen TDRs from Singapore and China, but we will target Japan, and even the United States.

"TDRs are the first leg and overseas primary listings are the second. They will support and boost the visibility of our market."

The number of TDRs will double to 20 this year, helping the total number of IPOs to 50 in 2010 from 36 last year, the exchange said.

Valuation differentials are attracting companies to Taiwan and investors to the firms.

Among other TDR issuers, Solargiga Energy's TDRs have a premium of 71 percent and Ju Teng International's about 20 percent, respectively, over their Hong Kong shares.

U.S.-based chip designer Integrated Memory Logic (IML) said it was attracted by Taiwan investors' interest in hi-tech firms for making a primary listing in Taipei. It surged 22 percent on its debut on May 18, though it has fallen 96 percent since then.

Total capital raised from TDRs was T$11.1 billion ($344 million) in January-August, compared with T$33.7 billion in the whole of 2009, when there were two big TDR issues by Want Want China and Tingyi.

Its scale, however, is still far smaller than Hong Kong, which saw the record-breaking $22 billion IPO of Agricultural Bank of China Ltd in July, and is readying for AIA Group's planned $15 billion IPO..

Some 59 companies are preparing to list in Hong Kong this year, according to Reuters data.

The key for Taiwan, analysts say, will be to attract big-name Chinese firms such as China Mobile or TCL.

"If the relationship between Taiwan and China gets closer and closer, Taiwan's capital market will definitely be a major beneficiary," said Janet Tseng, a vice president at Taiwan's Yuanta Securities, which managed IML's IPO.

But one cloud on the horizon is any tightening by China, which could hurt sentiment for TDRs.

"We really have to keep a closer eye on what China will do next," said John Chiu, a vice president and fund manager at Taiwan's Fuh Hwa Securities Investment Trust. "If the overall stock market does not do well, (TDRs) will suffer." (US$1=T$32) - Reuters

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