Investing Guide in Taiwan 2016 (Lite)

I. Macro Overview of Taiwan

  • Status and Prospects
    The Taiwan stock market, with its fully automated trading systems and book entry mechanisms, is known as one of the most active exchanges in the Asia Pacific region. At the end of October 2016, the total market capitalization (market cap) of the 885 companies listed on the Taiwan Stock Exchange (TWSE) amounted to US$869.8 billion. The market cap to GDP was 146.83% in 2015. Trading value was at nearly US$502.0 billion accumulated from January to October in 2016, which represents a market turnover rate of 54.64% and a P/E ratio of 17.47.
    In order to enhance the core competitiveness of the Taiwan securities market and to accelerate liberalization and internationalization, the authorities launched the “Market Uplift Plan” on Feburary 3, 2015. Furthermore, the authorities launched the “Pilot Program” for Fintech development in 2016 to encourage market participants to adapt to emerging financial technology applications. In terms of products, exchange-traded funds (ETF) products linking China, Hong Kong, Japan, the U.S., Europe, and India securities markets, as well as leveraged & inverse ETFs, future-based ETFs, and leveraged & inverse future based ETFs are already online. In light of this exciting development, a wider range of ETF products will be launched in the near future, such as currency index ETFs, VIX ETFs and soybean futures ETFs to satisfy various investment strategies.
  • Competitive Edge
    • The Taiwan securities market has substantially contributed to our economic growth, with more than half of the listed companies belonging to the dynamic electronics sector.
    • Our small to medium-sized enterprises, are known for their industry-leading operational strategies, a strong work ethic and excellent cost control. Taiwanese companies have created their unique edge through optimized production processes, unparalleled manufacturing efficiency, integrated services, and innovative spirit.
    • Taiwan has an export-driven economy that has decades of experience in working with international companies, offering decisive positioning in the Asia-Pacific region.
    • Taiwan is strategically positioned as a transportation hub in the Asia Pacific region, with its world-leading technology corporations forming strong industry clusters and the support of a sound financial system and outstanding talent pool. With so many strategic and economic advantages, Taiwan offers many opportunities for international investment capital.

II. Market Access - Getting Started

  • Registration
    Offshore overseas Chinese and foreign investors need to appoint a domestic agent representative (custodian bank) to apply to TWSE for registration. The domestic agent representative may apply to a securities brokerage firm to open an account and trade securities with the relevant documents only after completing registration.
    A list of custodian banks may be found in the following link:
    http://www.twse.com.tw/en/page/investor/foreign/03d.html
  • Required Documents
    1. Overseas Chinese and Foreign Natural Persons (having a nationality other than mainland Chinese and at least 20 years of age): a passport and other identification documents.
    2. Foreign Institutional Investors
      1. Non-funds: Banks, Insurance Companies, Securities Firms, Futures Commission Merchants, and others
        • (1)Company establishment certificate issued by the local government such as a company license; if there is no company license, the following documents may serve as a substitute:
          • (a)Articles of Incorporation of which the governing authority has a record.
          • (b)Qualification certificate issued by the tax bureau of the country where it is located.
        • (2)Other organizations established according to law, such as government investment institutions, non-profit organizations, foundations, and academic organizations: The certificate or the letter from the governing authority approving their establishment should be presented; if there is no such certificate or letter, the following documents may be substituted:
          • (a)Articles of Incorporation of which the governing authority has a record.
          • (b)The regulations or rules enacted as the basis for the establishment of the applicant.
          • (c)Qualification certificate issued by the tax bureau of the country where it is established.
      2. Funds: a Company Fund, Trust Fund, Partnership Fund, Pension Fund, Mutual Fund, Unit Trust, and Funds of other types
        • (1)The certificate or the letter from the local governing authority approving its establishment should be presented. If there is no such certificate or letter, the following documents may serve as a substitute:
          • (a)The record published on the website of the local governing authority showing that the fund has completed its establishment registration.
          • (b)Documents such as an offering prospectus, trust contract, or memorandum for private placement that can serve to show that the local governing authority has accepted the filing or has created a record.
        • (2)In the case that an applicant for registration is a sub-fund, and is unable to provide documents as provided in point (1), it shall substitute the following documents:
          • (a)Document in compliance with point (1) for the parent fund.
          • (b)Documents specifying the legal or regulatory basis of the establishment of the sub-fund, and sufficient proof of the relationship between the parent fund and the sub-fund.
  • Trading and Settlement
    Trading orders may be placed through the following methods:
    1. Trading through non-electronic media:
      The principal or its agent or authorized person can place orders in person or via telephone, in writing, or by telegraph.
    2. Trading through electronic media:
      The principal or its agent or authorized person can use voice mail, the Internet, a dedicated line, closed private network, or other electronic means approved by TWSE to place a trading order.
    The trading of securities, order confirmation, and execution report between a securities broker and a principal shall be conducted in accordance with the following provisions:
    1. Trading through non-electronic media:
      The execution report may be given by email, telephone, facsimile, text message, voice message, or the Internet.
    2. Trading through electronic media:
      The transmission of the brokerage order for purchase/sale of securities, order confirmation, execution report, and other electronic documents between a securities broker and the principal who uses an electronic trading method other than voice menu system must carry the electronic signature issued by the brokerage institution for identification and confirmation; however, this restriction shall not apply in the following circumstances:
      1. The order confirmation and execution report are conducted by telephone, facsimile, text message, voice menu system, or the Internet.
      2. The conditions for exemption are met under the Operational Guidelines for the Implementation of Direct Market Access by Futures Brokers.
    The TWSE is the clearinghouse for all trades executed in its market. A two-tiered settlement infrastructure has been adopted. First, local clients must complete the settlement of funds and securities with the executing brokers; foreign clients must instruct their domestic agent representative (custodian bank) to complete settlement with the executing brokers. Afterwards, all brokers need to complete the settlement of funds and securities with TWSE.

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