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The fund is a two-year, US dollar-denominated portfolio with a maturity date set for August 31, 2010. Investors are guaranteed 95% of capital (if they hold the capital until maturity) plus a potential index-linked payment at the maturity date. Minimum investment is $5,000.
The fund is aimed at investors who believe in the Taiwan economic growth story, but leans towards a conservative view for capital protection. Guaranteed funds were extremely popular in Hong Kong after the US technology bubble burst and most stock markets worldwide went into a downward spiral. When markets ended their slump, guaranteed funds waned in popularity. This latest fund launch could signal the return of this type of fund.
To cover the guarantee, the fund will invest around 91% of the assets raised in discounted US dollar negotiable certificates of deposits, deposits or similar debt securities issued by Fortis Bank (which serves as the guarantor).
ôWith Taiwan becoming an important part of the Greater China thrust, stronger ties with the mainland and the resulting positive economic sentiments will undoubtedly lead to structural improvement in TaiwanÆs economic development,ö says Carol Wong, head of distribution partners for Hong Kong at Fortis Investments.
The connection to China has been surfacing more frequently since the victory of the Kuomintang (KMT) or Nationalist Party in the March presidential elections in Taiwan. President Ma Ying-jeou has offered to reopen dialogue with China, which claims the island as its territory, while promising to maintain self-rule and a distinct international profile.
TaiwanÆs real GDP growth was 6.1% in the first quarter of 2008, beating expectations. Earnings for the TSEC Capitalization Weighted Stock Index (Taiex) are expected to grow at 8.50% in 2009, Fortis Investments estimates. The Taiex will be the index used for determining the index-linked payment of the fund.
ôWe believe this is a good entry point for mid- to long-term investments in Taiwan, as recent intensified volatility has brought the market back to pre-election levels,ö says Wong.
Over the long run, TaiwanÆs economy is expected to benefit from closer ties with China. Fortis Investments identifies the four major initiatives in bringing closer ties between Taiwan and the mainland that will serve as catalysts for further growth: charter flights that connect the straits; direct link for cargo, transport and passengers; liberalisation of mainland tourism; and relaxation of investment restrictions in China.
Infrastructure development is also expected to lead to opportunities in Taiwan.
Taiwan has embarked on an eight-year infrastructure project that will inject NT$3.99 trillion ($132 billion) in investments into 12 key projects led by a NT$1.4 trillion ($46 billion) expansion of TaiwanÆs subway, railway and highway systems. Other major projects include: developing Kaohsiung as tariff-free port; developing Taichung into a maritime and aerial logistics centre; developing Taoyuan airport as an æair cityÆ and expanding its Free Trade Zone; and setting up six industrial innovation corridors.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.