Taipei-Shanghai Stock Connect mired in confusion

China says it is studying a new Taipei-Shanghai Stock Connect scheme but the head of Taiwan's financial regulator claims talks have not yet started. He added that a Singapore Connect will be launched on July 1.
Taipei-Shanghai Stock Connect mired in confusion

The Taipei-Shanghai Stock Connect scheme is mired in confusion after several days of conflicting statements and denials around its launch.

And while the head of Taiwan’s financial regulator said this week that the Singapore-Taipei Stock Connect will be launched on July 1, the Taiwan stock exchange has refused to comment.

Despite the turmoil and lack of coordination between authorities, the Taiwan stock market yesterday took the news as a positive sign of future cross-border trade and closed at its highest level since the global financial crisis.

On Wednesday Jiang Yang, vice-chairman of the China Securities Regulatory Commission (CSRC), said the mainland regulator was studying the upcoming Shanghai-Taipei Stock Connect, which will allow mainland and Taiwan investors to buy shares in the bourses on either side of the border.

However, Tseng Ming-chung, chairman of Taiwan's Financial Supervisory Commission (FSC), was quoted by The China Times as saying that the regulator had not started Stock Connect discussions with the CSRC. He said this was because a trading link between Taiwan and mainland China was technically more complicated, thus more time was needed to study such a scheme.

On the other hand, Tseng revealed that the Taipei-Singapore Stock Connect will be launched on July 1, in a bid to further globalise Taiwan’s capital markets. He added that the island’s bourse will launch ETF Connect between Taipei and Tokyo, to allow cross-border listings of exchange-traded funds.

The Taipei-Singapore Stock Connect trading link will be similar in nature to the Shanghai-Hong Kong Stock Connect scheme, but some features will be different, according to a source.

When approached by AsianInvestor, an FSC spokeswoman declined to confirm any launch dates. She said that while the FSC had given the Taiwan Stock Exchange (TWSE) approval to launch the new Connect programme, the exact launch date should be announced by the TWSE.

“TWSE aims to launch the Taipei-Singapore Stock Connect this year, but it is still waiting for approvals from different departments,” a TWSE spokesperson said. “However, if the programme is launched in July, TWSE will be ready for it at an operational level.” The spokesperson said the bourse would be able to unveil more details next week.

The Singapore Stock Exchange (SGX) clarified its position on Wednesday by saying that both bourses have not yet confirmed the launch date.

Although the future of Taiwan’s trading links to Singapore and Shanghai are still unclear, investors welcomed the capital markets authorities' attempt to boost turnover. The TWSE weighted index jumped 1.92% yesterday to close at 9,797 points, its highest level since 2008.

Howard Wang, Hong Kong-based head of Greater China at JP Morgan Asset Management, said: “The [Shanghai-Taipei Stock Connect] programme would significantly boost turnover due to the impact of China flows, a market with literally 10 times the liquidity of Taiwan.”

Yesterday total A-share turnover on the Shanghai Stock Exchange reached Rmb966 billion ($156 billion), while the total TWSE turnover hit TW$145 billion ($4.7 billion).

TWSE and SGX signed an agreement to develop a stock trading link in September 2014, and TWSE received FSC approval last February.

The FSC’s Tseng last year said he wanted to attract more liquidity from Singapore since the city-state’s investors were Taiwan’s fourth-largest source of flows, after the US, continental Europe and the UK.

The Taipei-Singapore Stock Connect is part of the FSC’s plan to boost capital-market trading activities and diversify its range of investment products on offer. The FSC has also permitted domestic fund houses to offer exotic exchange-traded products like leveraged and inverse ETFs and futures-based commodity ETFs.

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