Taiwan and China are planning to permit trading of each other’s shares for the first time as ties improve.
A so-called trading platform may list as many as 30 stocks from each market, Taiwan Stock Exchange chairman Schive Chi (薛琦) said. Investors are currently restricted from directly investing in each other’s equities. An agreement on the dual listing of exchange-traded funds (ETFs) is also expected this year, he said.
“It will be a step further,” Chi said in an interview on Monday. “Instead of trading exchange-traded funds, it will be trading individual stocks.”
“Investors will definitely be interested” in the cross-trading of China and Taiwan stocks, said Monika Yang, who helps oversee US$10 billion at Hamon Asset Management Ltd in Hong Kong. “Investors have a wider variety of shares to trade in. Chinese investors will want to diversify their investment and this is a good way for Taiwan investors to buy Chinese shares.”
Taiwan is also trying to draw as many as 37 Taiwanese-owned companies listed in Hong Kong back to its exchange, Chi said. A separate agreement on so-called ETFs with Hong Kong may be completed by next month, he said.
Taiwan and China plan to sign an accord on financial services and a cross-currency settlement system, officials said last month. China’s currency isn’t fully convertible, and the country limits foreign ownership of shares traded on its exchanges.
Allowing cross-trading of Chinese and Taiwanese shares may draw investors away from Taiwan, said Jason Huang, a fund manager at Paradigm Asset Management (華頓證券投信) in Taipei, who helps oversee more than US$200 million.
China’s shares are valued at US$2.6 trillion, the world’s third-largest stock market, according to Bloomberg data. Taiwan’s market is worth 20 percent of that, the data show. Daily trading of Chinese stocks averaged at US$22.5 billion in the past six months, compared with Taiwan’s US$2.7 billion.
“If Chinese stocks are traded in Taiwan, there could be a chance investors will choose to buy only Chinese stocks, marginalizing Taiwan shares,” Huang said.
Taiwan’s share rally may have outpaced share value as companies had not seen the benefits of potential links with China, Mark Mobius, who helps oversee US$20 billion in emerging-market assets at Templeton Asset Management Ltd, said earlier this month.
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