AsianInvestor’s regulatory roundup, Nov 25

Taiwan unveils Singapore stocks link; Australia secures RQFII quota; PBoC releases RQDII rules; Thai Reits set for inheritance tax; Hong Kong signs Fatca as deadline looms; chairmen set for cross-Strait talks; Stability Board urges unity; and Asic eyes disclosure innovation.
AsianInvestor’s regulatory roundup, Nov 25

Taiwan: Singapore stocks link set for 2015
A trading link connecting the stock exchanges of Taiwan and Singapore is expected to be launched in the first half of next year, said Tseng Ming-chung, chairman of Taiwan’s Financial Supervisory Commission.

Tseng confirmed the link at a finance committee meeting last month, adding that a similar link was planned with Japan in the second half of next year. Negotiations for a stocks link with London are also already underway.

Singapore Exchange first signed an agreement for a trading link with Taiwan in September, as reported.

Australia: Rmb50 billion RQFII quota unveiled
Australia has received an Rmb50 billion ($8.2 billion) renminbi qualified foreign institutional investor (RQFII) quota to invest in RMB-denominated securities, the People’s Bank of China (PBoC) announced on November 17.

A currency clearing house will be set up in Australia to facilitate RMB trades.

The following day Chinese president Xi Jinping signed a statement of intent for a free-trade agreement with Australia.

Nevertheless, demand for RMB-denominated securities is expected to be lacklustre in Australia given that investors already feel they have exposure to China via commodities, a key component of the two nations’ trading relationship, as reported.

China: PBoC releases RQDII rules
The People’s Bank of China is to allow domestic institutions to invest in renminbi-denominated assets abroad with immediate effect.

A notification published on November 14 stated that renminbi-denominated qualified domestic institutional investors (RQDIIs) could use their own money to invest in RMB assets overseas.

While they don’t need to apply for quota, whatever money they raise for RQDII products onshore they cannot exceed with their overseas capital commitment.

The new rules also state that qualified investors must report to the relevant regulator before venturing overseas to confirm RQDII eligibility and product issuance and to outline their intended investment activity.

Thailand: Reits to benefit from inheritance tax
The Thai cabinet has approved an inheritance tax bill that has been pushed by the country’s military-backed government.

The planned bill, which will levy 10% on estates worth more than Bt50 million ($1.5 million), will be reviewed within a period of six months before being sent to the National Legislative Assembly.

Local fund managers say that this may well benefit real estate investment trusts (Reits) in the country, because the new tax rules could mean rich individuals moving to shift more money into trusts, and the only ones available right now are Reits.

Hong Kong: Asia’s fourth Fatca signatory
Hong Kong has become only the fourth market in Asia Pacific to sign an inter-governmental agreement (IGAs) to comply with the US Foreign Account Tax Compliance Act (Fatca).

Hong Kong inked the deal on November 13, joining Australia (April), New Zealand (June) and Japan (June) in signing the pact, which commits foreign institutions to send account information on their US clients to the Internal Revenue Service (IRS).

Each institution agrees to pass client information to authorities where they are based, which subsequently forward it to the IRS.

The US had imposed a deadline for Fatca compliance of July 1, but relaxed that in May. However, it still requires jurisdictions to sign an IGA by December 31. There is then a transitional period for compliance to 2016.

Asian jurisdictions are treated as Fatca-compliant in substance, including China, India, Indonesia, Malaysia, Singapore, South Korea, Taiwan and Thailand.

But Angelica Kwan, US tax partner at PwC in Hong Kong, warned: “It’s already late November. If no further relief is given by the US, we’re going to see various governments pushing to get their IGAs finalised in the weeks before year-end.”

Taiwan: Chairmen set for cross-Strait talks
The chairman of Taiwan’s Financial Supervisory Commission, Tseng Ming-chung, is set to meet his mainland Chinese counterparts this month, local media reported.

Tseng is due to travel to Beijing in December to meet China Banking Regulatory Commission chairman Shang Fulin, China Securities Regulatory Commission chairman Xiao Gang and China Insurance Regulatory Commission chairman Xiang Junbo.

Talks about regulatory collaboration are on the agenda, although discussions on wholesale industry liberalisations are reportedly not.

In June last year, China and Taiwan signed the Cross-Strait Service Trade Agreement, which covers the opening up of services between the two sides.

The pact also covers Taiwan’s inclusion in the mainland’s renminbi qualified foreign institutional investor (RQFII) scheme.

However, the agreement has stalled after demonstrations about it broke out in March, with protestors occupying Taiwan’s Legislature.

International: Stability Board urges unity
The Financial Stability Board (FSB) has called on world leaders to work more closely in regulating and supervising the global financial system.

In an open letter published at the G20 Summit in Brisbane in mid-November, the FSB stated that better cross-border cooperation was required to build trust between leaders.

“That job is not straightforward because, although markets and many financial institutions are global, regulation remains national or regional,” said Mark Carney, FSB chairman and Bank of England governor.

“Concerns about spillovers from failures of foreign institutions, or market contagion starting elsewhere, can prompt jurisdictions to safeguard themselves unilaterally, given that a national regulator’s first responsibility is to do its utmost to ensure the safety and soundness of its home jurisdiction.”

The FSB, established in 2009 to monitor the global financial system, has encouraged jurisdictions to implement international standards and has established a programme of peer reviews to assess the performance of G20 members.

It will begin an annual reporting process on implementation from next year, designed to highlight both shortcomings and good practice, with a focus on emerging markets.

Australia: Asic targets innovative disclosures
The Australian Securities and Investments Commission (Asic) is seeking industry feedback after proposing greater innovation in product disclosure.

Launching the consultation process, the financial services regulator said the aim of its proposals was to improve investor engagement.

It has suggested delivering disclosure documents digitally to benefit both consumers and providers, including potential cost savings, noted Asic commissioner John Price.

However, legal barriers would need to be overcome, including certain requirements for printed disclosures such as the need for documents to be easily stored by consumers. The consultation runs until January 16.

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