Taiwan considering allowing Chinese to invest in local stocks, could fuel volatility

[TAIPEI] Taiwan is considering allowing individual investors from mainland China to trade local shares, highlighting growing business ties between the rivals but possibly bringing more volatility to the island's stock market.

The move comes as part of the Taiwan Financial Supervisory Commission's efforts to stimulate the stock market.

FSC Chairman William Tseng told reporters on Wednesday that details would be available in June and implementation would begin in the third quarter. Mainland investors could trade local stocks via Taiwan's offshore securities units. "We hope to attract big Chinese investors to stock-related products," said the chairman.

Some analysts welcomed the move, but warned of volatility to the market, where about half of trading is dominated by retail investors and one-third by foreign investors. "It'll be helpful for the Taiwan stock market," said Tai Hui, Asia chief market strategist for JPMorgan Asset Management. "Initially it will trigger volatility to the market depending on the situations in China and Taiwan markets then,"he said at a news briefing in Taipei.

Business and financial ties across the Taiwan Straits have gathered steam since President Ma Ying-jeou took office in 2008.

REUTERS