Financial enterprises aim for MOU niche in China

Cathay Pacific Investment Trust (CPIT), which announced that it had signed a two-year exclusive-dealing arrangement with China's largest fund company China Asset Management (Hong Kong) Ltd., is expected to be ahead of its competitors once the terms of the MOU are implemented next year.

Cooperation with local enterprises is crucial to the management of China stocks because investors' concept in China is vastly different from Taiwan, Chang Hsi, CPIT's general manager said.

　　Polaris Fund Management is also under talks with major Chinese trust funds to introduce an exchange-traded fund (ETF) of China A Shares while First Securities Investment Trust is negotiating with China's fourth largest fund China Southern Fund to get their piece of the niche market that is now made available by the MOU.

　　Banks that currently have liaison offices in China are also looking forward to extending their reach in the world's third-largest economy. Banks with government investment such as Taiwan Cooperative Bank, Land Bank and First Bank have expressed their intention to establish branches in China as soon as it is legally possible.

　　The banks are expecting to broaden their loaning service to Taiwanese businessmen in China once their branches are established. For now, most liaison offices are only participating in research works. Taiwan banks are already able to offer loans to Taiwan businessmen. However, the banks are conservative in extending loans in this area because they can only vet the parent company in Taiwan while their branch companies in China are off-limits for now.

　　With branches in China, the banks can have better supervision over these branch companies while companies will be able to use assets in China as collateral, thereby increasing the appetite for banks to offer loans.

　　However, with lower capitals and too much focus on Taiwanese businessmen, local Taiwan banks might not be able to keep up with foreign banks such as Citibank, HSBC and Standard Charters, in entering the Chinese market, a Merrill Lynch analyst said.

　　Taiwan individual brokerage firms will also benefit from the opening of China financial sector but only with restrictions. A firm can only hold a maximum of 33.3 percent of foreign stocks and is also barred from A shares. Taiwan Securities Association said it is looking forward for China to ease the limitations and open selected cities such as Beijing and Shanghai for experimental unrestricted brokerage.

Under the MOU, which was signed Monday and will take effect within 60 days, Taiwan and China will work together to exchange and protect the confidentiality of information, establish a mechanism to deal with possible financial crises, and conduct financial examinations, Financial Supervisory Commission (FSC) chairman Sean Chen said Monday after representing Taiwan in signing the documents.

Once the MOU comes into effect, China's QDIIs will be allowed to invest up to 10 percent of their assets in Taiwan's stock market, according to Chen.

China has 12 QDIIs and its State Administration of Foreign Exchange (SAFE) has granted the 12 QDIIs investment quotas of about US$10 billion (NT$325 billion) as of the end of October.

Based on the 10 percent maximum investment limit in Taiwan's stock market, the 12 QDIIs will be able to inject up to approximately NT$30 billion in the local bourse.

Under existing regulations in China, Chinese QDIIs are only allowed to invest up to 3 percent of their assets in public and corporate bonds in regions that have not signed an MOU with China.

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