Taipei market cheers plan for mainland investment

PUBLISHED : Friday, 01 May, 2009, 12:00am
UPDATED : Friday, 01 May, 2009, 12:00am

Taiwan stocks had their biggest daily rally in 18 years yesterday on hopes China Mobile's plans to buy a stake in the island's telecommunications sector will open the floodgates for other mainland investments.

The benchmark Taiwan Weighted Index advanced 378.51 points or 6.74 per cent to close at 5,992.57.

Hopes are building that warmer cross-strait relations will augur a string of deals in Taiwan by cashed-up mainland firms, bolstering the recession-hit island's economy.

Taipei announced yesterday it would allow the mainland's qualified domestic institutional investors to buy into Taiwan stocks.

This came a day after state-owned China Mobile said it would take a 12 per cent stake in Taiwan's Far Eas-Tone Telecommunications for NT$17.8 billion (HK$4.17 billion).

But pro-independence camps opposed to closer links with Beijing slammed the move, warning mainland firms would now get their hands on the island's core technology.

The island's Financial Supervisory Commission said that from Monday, QDIIs would be allowed to buy Taiwan stocks as long as the investment did not exceed 10 per cent of a listed firm's total market value. 'The move is aimed at injecting more funds into the market to help expand the market scale and improve our internationalisation,' it said.

The announcement marks the first time any mainland institutional investors have been allowed to invest in Taiwan's stock market in 60 years. Cross-strait ties warmed after the election of the Kuomintang's mainland-friendly Ma Ying-jeou as president in May last year and the adoption of a policy of engaging Beijing.

The planned China Mobile deal, which Far EasTone hopes will materialise by year-end, sent shares of the island's third-largest operator to a four-month high of NT$37.65, up close to the daily 7 per cent limit.

Shares of local steel firms also surged after the mainland's moves.

SinoSteel Corp, the mainland's second-largest iron ore trader, will organise a tour to Taiwan this month to seek investment opportunities.

Analysts and economists said the prospect of Taiwan opening itself to mainland investment raised hopes of a boost for the island's economy, which is forecast to contract 2.97 per cent this year after shrinking 8.36 per cent in the final quarter of last year.

'The mainland investment is expected to bring funds to Taiwan, which will help bolster the economy,' said Bentham Hung, an analyst at Mega Wealth International Management Consultancy.

He said while Taiwan had more than US$150 billion worth of investments on the mainland, it would be to the island's disadvantage if its market remained closed to the mainland.

Facing a shortage of funds, many Taiwan businesses have repeatedly urged the government to open the island to mainland investments. The Ma government finally agreed to the liberalisation during the third cross-strait summit in Nanjing on Sunday.

The main opposition Democratic Progressive Party (DPP), the Taiwan Solidarity Union (TSU) and other groups strongly opposed the moves.

'It will result in state-run Chinese firms buying core Taiwan technology to compete with Taiwan. In the end, Taiwan will be hollowed out,' said TSU chairman Huang Kun-huei.

DPP chairwoman Tsai Ing-wen said the Ma government needed to curb mainland investments in core and high-technology industries.

Economics Minister Yiin Chii-ming said the ministry would unveil rules governing mainland investments in Taiwan by month's end.