A number of developments are taking place in Taiwan aimed at boosting its standing as a renminbi-denominated and offshore investment hub, says the local Securities Investment Trust and Consulting Association (Sitca).
For one, the Taiwan Stock Exchange is setting up a system to allow trading of renminbi-denominated securities. Exchange-traded funds are likely to be the first type of product to have an RMB trading tranche, says Henry Lin, chairman of Sitca and president of Fubon Asset Management. This dual-counter trading is expected to come in the second half.
Lin says the recent renminbi depreciation has not affected Taiwanese investors’ appetite for RMB investment, as the long-term trend is for the currency to rise. He also notes that the stock market is at a low point, making it a good time to buy.
There is Rmb214.5 billion ($34.3 billion) in offshore deposits in Taiwan. Sitca has proposed that the government remove the daily Rmb20,000 conversion limit for individual investors if they wish to invest the money in a mutual fund. This would help spur RMB investment in the country, adds Lin.
Meanwhile, recently relaxed rules for selling products in Taiwan are leading to new opportunities.
The Financial Supervisory Commission (FSC) in February lifted the restrictions on the types of investment products available to non-resident investors in Taiwan. As such, banks’ overseas banking units (OBUs) can sell offshore investment products, such as mutual funds registered outside the country and offshore RMB funds.
Citibank Taiwan, for instance, has put 26 offshore funds, including RQFII products, on its OBU platform. The first batch of partners includes Allianz Global Investors, China Asset Management (Hong Kong) and Hong Kong-based Value Partners.
Li says the association aims to use the OBU as a platform for further relaxation of the rules for Taiwanese fund firms – for example, allowing them to sell funds dominated in foreign currencies to foreign investors or institutional investors on the platform.
Taiwanese managers also want to be allowed to develop products that are currently restricted onshore, such as hedge funds or structured products, and sell them on the OBU platform.
The association says it has provided these views to the FSC and received positive feedback from the regulator.