FOCUS: Could you give us a bit of background about your exchange?
GTSM: The GreTai Securities Market (GTSM) is celebrating its 20th anniversary this year. Since our founding, we have actively assisted small and medium-sized enterprises, with a focus on innovative and high-tech industries, to attract listings and to facilitate their funding. This has brought great momentum into Taiwan’s securities market and has promoted the economic growth for the Taiwan economic miracle.
We operate not just a stock exchange but also an OTC trading market for bonds and OTC derivatives in the Taiwan securities market. We have successfully set out multi-tiered markets including the Main Board, the Emerging Stock Market, the Go-incubation Board, and the Go-funding Zone.
FOCUS: How active are foreign investors in your exchange? How accessible is your market?
GTSM: Foreign investors are increasingly willing to invest in Taiwanese capital markets due to the stable and growing economy. The proportion of GTSM-listed stocks held by foreign investors has grown steadily over the past few years. At the end of 2013, foreign investors owned 17.46% of the listed stocks in GTSM, an increase of more than 100% since 2008, after the financial crisis period, when it was just 7.43%. In terms of trading value, foreign investors accounted for 5.91% of the equity trading value in GTSM in 2013. Foreign investment in GTSM-listed companies will increase gradually as the world economy driver comes from the SMEs’ recovery.
Easy accessibility for foreign investors is one of the most important steps for GTSM to connect with international financial markets. There are currently no investment limits nor investor qualification requirements applied to foreign investors in Taiwan securities markets. Simplified application procedures for the commencement of foreign investment in the Taiwan stock market were adopted in 2003. Currently, foreign investors are only required to register before opening trading accounts with local brokers.
The Taiwanese government has adopted a gradual pace in opening the market to foreign investors. There have been three milestones serving to lift foreign investment restrictions since 1991. Qualified Foreign Institutional Investors (QFII) were permitted to invest directly in Taiwan stock markets first in 1991, followed by general foreign juristic persons and natural persons permitted in 1996. The investment quotas set for foreign investors were removed in September 2003, along with the international path to the best practice of the IOSCO Corporate Governance standards.
FOCUS: What new project/product are you currently working on?
GTSM: My strategy is to build GTSM into a multi-tiered international exchange. In order to expand the market size of the Main Board and the Emerging Stock Market, the pre-IPO market, we are constantly encouraging promising enterprises to apply for listings. Moreover, we allocate resources into incubating micro-enterprises and start-ups with good growth potential in every sense. On the other hand, GTSM has supported the creativity and innovation projects through facilitating donations by launching the ‘Gofunding Zone’ website last year. We have also established the ‘Go Incubation Board for Start-ups and Acceleration Firms’, GISA, as a well-managed platform for individual and institutional investors to access micro-innovative companies. Both are integrated to meet the crowd funding concepts with some Taiwanese culture ingredients.
In addition to these initiatives, we are working on new products to meet market needs. The products we have recently launched include some new indexes and the RMB-denominated bond market (known as the Formosa Bond). New measures have been taken to improve trading efficiency, such as accommodating the trading mechanism of the Emerging Stock Market and reducing restrictions on margin trading and day trading. We are also constantly encouraging the enhancement of corporate governance to protect investors, through a public agent of the investor protection institute which is quite unique in the world.
FOCUS: What are the challenges you see in your market today and in the future?
GTSM: We have noticed that there are two common challenges faced by exchanges across markets in the world: decreasing market growth rates and increasing regulation costs. The GreTai Securities Market is no exception to facing and dealing with those difficulties. Besides, a new wave from the Mainland China capital market development and economic growth, Taiwan has to face the new challenges and opportunities to grow with the new wave due to the same culture and the different economic systems. We will formulate strategies and adopt approaches aligned with the driving factors of SMEs’ development and growth for the risks and opportunities.
FOCUS: How do you assess your exchange’s position at a time of increased globalization?
GTSM: The SMEs on GTSM keep growing even in the face of the financial stress from previous years. We have been lightened a lot from fostering SMEs and overcoming economic challenges. We are more than happy to share the experience and knowledge we have gained with WFE members.
In emerging economies, most domestic companies are SMEs. I think the exchanges of emerging countries are obligated to support SMEs in their home markets. For example, the main purpose of the new website and market we launched recently to fund small- and micro-sized companies is not just to expand our product spectrum, but to contribute to the development of our economy. I think the development of society and capital markets should be mutually connected. That’s why we focus not only on wealth and growth accumulation within the markets, but on the happiness and culture created for our society. In practice, we develop multi-tiered markets for the funding needs of companies in different sizes. Also, we provided with diversified products, both equities and non-equities, for investors and issuers. To protect the investors and to balance the interests of the investors and issuers, we ensure the GTSM exchange we operate in a transparent, safe, efficient and fair way in the world.