Taiwan Today

Qualified domestic institutional investors from mainland China are facing further restrictions on Taiwan investments as the government seeks to avoid bubbles in specific industries and the stock market. The potential changes are expected to be disclosed by the end of this year and may include lower caps on stake ownership and total allowable investments, according to sources familiar with the matter. As the mainland QDIIs will soon enter Taiwan following the sealing of the cross-strait financial memorandums of understanding, it was reported that the Financial Supervisory Commission will meet with other Cabinet-level government agencies such as the National Communications Commission and the Ministry of Transportation and Communications to study possible changes to existing rules governing QDII investments. At present, the upper limit for QDII investment in any single company in non-specific industries is 10 percent. The QDIIs are also prohibited from taking seats on company boards. However, sources said government officials think stock exposures in the domestic open market by mainland investors need to be capped as certain industries—such as the financial, telecommunications, airline and transportation industries—are closely tied to national security and the interests of local citizens. In addition to a lower cap on stake ownership, the FSC is also considering introducing a limit on combined fund injections. While mainland investors’ impact in the early stage could be marginal, given the daily turnover level in the local bourse, the effect in the Taiwan market could rise in line with expansion in their scale forward, officials reasoned. Meanwhile, sources said supervision over mainland investors would go to the Investment Commission under the Ministry of Economic Affairs and other business regulatory authorities. The mainland’s rules allow QDIIs to invest up to 3 percent of their funds in countries amid an absence of financial MOUs, while 10 percent is imposed for target countries with such pacts in place. Based on their total scale of NT$370 billion (US$11.44 billion), mainland investors could invest up to NT$37 billion in the island’s equity market after cross-strait MOUs take effect. (HML-THN)