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THE Singapore and Taiwan stock exchanges are in talks on potential cross-trading of selected shares listed on both bourses, the Taiwan bourse's chairman revealed yesterday. For a start, each side may shortlist a pool of high-quality stocks for the cross-trading.
"Currently, investors can already trade shares on the other bourse by routing their orders in a round-about way through two different brokerages on both sides," said Taiwan Stock Exchange (TWSE) chairman Lee Sush-Der. "But if there is one single window to trade each others' shares, one layer of brokerage fees is removed and the overall costs will be lower."
Mr Lee, who was also Taiwan's finance minister from 2008 to 2012, led a delegation to Singapore this week to promote Taiwan's capital market to brokerages, funds, insurance firms and South-east Asian companies.
It was at his meeting with Singapore Exchange (SGX) chief executive Magnus Bocker on Wednesday when the idea of a cross-border trading connectivity between Singapore and Taiwan was mooted. SGX and TWSE have formed a working group to discuss the specific mechanisms, such as trading, clearing and settlement systems, computer systems and marketing.
When approached by The Business Times, SGX said it will continue to strengthen its partnership with its counterparts in Taiwan "and be open to any opportunity and collaboration that may benefit our shareholders, customers and the Singapore marketplace".
SGX has a similar tie-up with the London Stock Exchange that allows SGX members to trade FTSE 100 securities on the Singapore bourse's GlobalQuote Board, and LSE members to trade 36 securities of Singapore's leading indices on the London exchange's newly created International Board.
In its efforts to internationalise faster, TWSE is also wooing Singapore companies to list in Taiwan by way of direct listings or secondary listings via Taiwan Depositary Receipts (TDRs). A few Singapore companies are in the pre-IPO consultation stage with TWSE, Mr Lee said.
"But encouraging foreign listings is a continual process, while cross-trading of shares is something that can be done in the short run," he added. "Hopefully, by the end of the year, we would have come up with a viable system."
TWSE started to internationalise since 2008 with the TDR regime but its efforts have met with limited success. As of last year, less than 7.4 per cent of all issuers on TWSE were foreign companies. Of about 27 TDR listings by foreign companies, eight are from Singapore companies.
Growth in foreign participation has also slowed in recent years. The market value on TWSE held by foreign investors was 16.3 per cent of the overall market in 2000. It rose significantly to 34 per cent in 2006 but has hovered around that level since. The trading value of foreign investors accounted for 24.6 per cent of the total market last year.
Mr Lee conceded that a smaller institutional investor base is a bugbear for TWSE, as retail investors still account for 60 per cent of its securities turnover.
Taiwan's Asian Pay Television Trust listed in Singapore last year as a business trust, while private equity fund MBK Partners was said to be considering a business trust listing for China Network Systems, Taiwan's largest cable television operator, here.
There is no framework in Taiwan yet for business trusts listings; there are less than eight real estate investment trusts (Reits) listed in Taiwan.
Meanwhile, restrictions on direct listings for mainland Chinese companies are still in place. Mainland companies can only undertake secondary listings in Taiwan via TDRs and use the proceeds for operations in mainland China.
More deregulation is in TWSE's favour, but political dynamics and the timing of deregulation still depend on Taiwanese regulators, Mr Lee said.
Shanghai and Hong Kong stock exchanges are planning a direct link that will allow investors in Hong Kong and Shanghai to cross-trade shares. When implemented, Hong Kong investors can buy and sell shares on Shanghai Stock Exchange for the first time outside of China's qualifying schemes.