Foreign Issuer Applying for Listing on Taiwan GTSM and Emerging Stock Market June 12, 2008
OUTLINE • Snapshot of Taiwan’s Economy • The Status of Taiwan’s Capital Market • The History & Characteristics of GTSM Securities Market • Emerging Stock Board Registration • Regular Stock Board Listing • Conclusion
Since the 1997 Asian financial crisis, the Taiwan economy has confronted a number of challenges, including, among others, the rise of the Chinese economy, the burst of the dot-com bubble in 2000, and SARS. In response to these challenges, Taiwan has undertaken financial reforms and economic transformation, and emerged stronger. Introduction
Economic Performance • Average growth rate of the economy for the past four years (2004-2007) was 5.2%, compared with 4.7% for Korea, one of its most important competitors. The economy is expected to grow at 4.5% in 2008 amid growing global concerns about recession. • The subprime mortgage problem has had relatively limited effect on the economy. The FSC put subprime loss at US$741mn, as per yearend 2007. • The economy is fundamentally strong.
Economic Performance • Although it imports 98% of energy, and global energy prices have been significantly rising recently, Taiwan has been able to maintain price stability. e.g. the CPI growth remains less than 1% in 2001-06, while it rose to 1.8% in 2007 due to the surge in global raw material prices. • The unemployment rate peaked at 5.17% in 2002 due to rapid migration of labor intensive manufacturing industry to China and dot com bubble. It is now at the six year low rate of 3.9% as a result of economic growth and various government policy of job creation.
Latest Indicators • GDP Growth Rate [2008forecast ]: 4.78% • GNP [ 2007 ] : 12,933,890million NT dollars • Per Capita GNP [ 2007 ] ： 566,566NT dollars • CPI Change Rate : 3.86% (Apr. 2008) (compared with the same month last year) • WPI Change Rate : 6.18% (Apr. 2008) (compared with the same month last year) • Unemployment Rate : 3.81% (Apr. 2008) • The economic growth of 2008 is forecasted to 4.53%.
Weakness Strength ‧Abundant high quality human resources. ‧Excellent entrepreneurial spirit and R&D Capabilities ‧Solid manufacturing industry base ‧SMEs highly flexible in responding to market changes. ‧Inadequate investment in R&D and infrastructure. ‧Fragile financial system and chronic budget deficits. ‧Rigid labor markets Opportunity Threat ‧ Efficiency of Full Government ‧ Geographic center ‧ Research and development capabilities ‧ Rising market opportunities in the BRICs ‧Rise of the BRICs and formation of regional trading blocs: Hollowing-out (?) and widening income gap ‧Rising energy and raw material prices. SWOT Analysis of Taiwan’s Economy
Taiwan’s Momentum • the 144th member of the World Trade Organization (WTO) • Taiwan’s overall competitiveness ranked 13, IMD’s report, “World Competitiveness, 2008 ” • Rank the top 5 competitive countries according to the WEF Global Competitiveness Report 2005-2006 • By the end of Mar. 2008, the foreign exchange reserves hit US$286.86 billion
Prospects • Speed up the direct transportation across the strait. • Relax the upper limit of 40% net value for Taiwanese businesses investing in Mainland China. • Study the amendment of“The statues of relationship between the people in Taiwan and Mainland China” and establish as early as possible the cross strait currency exchange mechanism. • Aggressively open the door for tourists from Mainland China to visit Taiwan and invest real estate property. • Sign the memorandum of cross strait financial market collaboration, allow capital to Mainland China
The Status of Taiwan’s Capital Market • Knowledge of the manufacturing sector and particularly the information technology companies • Top 10 industries by market capitalization and trading values (End of 2007))
Enhancing the Confidence of Foreigners • Foreign ownership of Taiwan stocks as a percentage of total market capitalization rose from 22.18% at the end of 2004 to 31.1% at the end of 2007.
Enhancing the Confidence of Foreigners Unit: US$ billion Abolished the screening system for qualified foreign institutional investors (QFII) Total Accumulated Net Inward Remittance Source: FSC
Powerchip (5346力晶) Semiconductor VIS (5347)世界先進) Semiconductor ProMOS (5387茂德) Semiconductor MOTECH (6244茂迪) Optoelectronic KGI (6008中信證) Finance FIRICH (8076伍豐) Computer & Peripheral Equipment SAS (5483中美晶) Semiconductor Wafer Works (6182合晶) Semiconductor Foreign Capital also Flowing in GTSM • The percentage of foreign ownership of Taiwan stocks is growing not only in TSEC, but also in GTSM. • MSCI Taiwan Index including GTSM companies:
Corporate Governance • Taiwan's ranking in corporate governance rise to 4th place in the “Asia Corporate Governance report 2007” published in 2007 by Asia Corporate Governance Association. • Corporate governance provides a firm foundation for the development of financial markets. A good corporate governance mechanism improves the health of the corporate sector and enhancing competitiveness. • GTSM has extensive experience in promoting corporate governance and creating a positive corporate governance culture. • Based on the latest OECD Principles of Corporate Governance, GTSM requires listing companies focus on Board functions, non arms-length transactions, supervisory responsibilities for corporate governance, and corporate social responsibility.
Importance of Taiwan’s Alternative Market • SME • -Take major part of industry composition • -Entrepreneurship • Taiwanese want to be their own boss rather than work for others • Industry Upgrade • -Shift from Labor to Capital Intensive • Direct Financing vs. Indirect Financing • Securities Market Segmentation and Coordination GTSM plays a role as an effective fund-raising channel for the medium and small business.
GTSM’s Basics • 14 years old • Non-profit organization with no stock ownership and membership • Quasi official, market-oriented • Each 1/3 of board member designated by SFB, appointed by major donators, and third-party respectively • Full time executive • 3 markets • Equities – Regular, Supervised and Emerging stocks, DRs, ETFs and warrants • Bond –Government bonds, financial bonds, foreign bonds, corporate bonds, convertible bonds • Financial Derivatives – Corporate bond asset swaps, forward rate agreement, index derivatives • Staff • 240
Listing Exam. Dept. Listing Supervision Dept. Senior EVP Supervisors Bond Dept. Administration Dept. President Board of Directors Chairman Trading Dept. Information Dept Compliance Dept. Senior EVP Auditing Dept. Planning Dept. Organization Chart
History of GTSM • Nov. 1, 1994Established as a Government Designated Organization • Dec. 1994 QFII Allowed to Invest • Sep. 1995 Trading Rules Revised • Jan. 1998 Margin Trading Allowed • July 24, 2000Electronic Bond Trading System (EBTS) • Jan. 1, 2002 Emerging Stock Market Established • May 2002Joined IOSCO as an Affiliate Member • Dec, 2003Hosted 2nd Asia Pacific New Market Forum • Nov. 2004Hosted 1st Int’l Bond Market Conference • Mar. 2006Hosted 2nd Int’l Bond Market Conference • Sep. 2006 Listing of Taiwan’s First Foreign Currency-Denominated Bond • Nov. 2006 First GTSM Int’l Bond “Formosa Bond” Listing Embarked Overseas Taiwan Bond Market Roadshows • May 2007 Embarked Overseas GTSM Corporate Roadshows • Nov. 2007US Treasury Bond Quote System Go Online Hosted 3rd Int’l Bond Market Conference
Beginner’s Strategies • “Follower” Philosophy • Position ourselves as a gateway market • Cooperate and coordinate with the stock exchange • Create own characteristics in market role • OTC no longer stands for Over-the-Counter, but Over-the-Computer Enlarge the Market Scale • Providing high-quality service and enhancing efficiency • Laying great emphasis on market efficiency • Improving the liquidity • Increasing the incentives for issuers to list
as of April 30, 2008 Listed Companies by Industrial Sectors
Higher Turnover Higher P/E
Avg. Daily Turnover NT$ Million
Higher P/E Ratios End of 2007
Individual investors’ active participation and more than 85% of total market trading volume to high tech related Sectors Stock Trading Values of Major Sectors Jan.~Apr. 2008 Breakdown of Trading Values for Investors Jan.~Apr. 2008 Retailer investors dominate the market
Characteristics of GTSM • Multiple Trading Approaches • Computerized Auto Matching • Negotiation Trading • Off-Exchange Transaction
GTSM Regular Stock • (As end of May 2008) 551 Listed companies • Market Capitalization：NT1,766bn • Daily Trading Value: NT$19.45bn • Daily Trading Values in 2007: NT$ 34.56 bn • Historical High: NT$ 109.4 bnJuly 26, 2007
GTSM Examples of Corporate Growth Unit: NT 100 million
Bond - Primary Market Bond market size has grown at average 7% annually for the past 5 years US:NT$=$32.5
Bond - Issuance Composition Government bond accounts for the largest portion (2007)
Bond -Trading Status Currently, over 90% outright trading are through GreTai’s EBTS *Total buy and sell amount among brokers and clients. * EBTS = Electronic Bond Trading System USD:NTD=1:32.5
Ongoing Missions of GTSM • Global Semiconductor ETF, ISO CG ETF • Taiwan Supervision Center 監理中心 • Operational Property Service Platform 營業用資產服務平台 • VCs Startups IPO 創投投資標的上櫃 • Agricultural Technology IPO農業技術上櫃 • Development international cooperation -Asia Bond Trading Platform 亞洲債券交易平台
123 Plan for Attracting Overseas Companies • Goal The purpose of this project is to assist these Taiwanese Enterprises listing in Taiwan including Primary listing or Secondary listing. Encouraging the foreign issuer whose product has commercial potential for the global market and the place of register is not in Taiwan applying for listing on Taiwan GTSM and Emerging Stock Market . • Amending statutes and assisting corporations to list Most overseas corporations listed by issuing Taiwan Depository Receipts (TDRs) in the past. Upon amendment of relevant statutes, overseas companies will be allowed to launch primary listings, a much simplified process.
Listing on GTSM’s Advantages • Very favorable PE valuations for SME to raise capital for funding organic growth and sustainable development. • Economic and efficient way close to high-tech and knowledge-based clusters. • A platform quickly raise the issuer’s reputation. • Much easier channel for SPO in stock market. • Attracting outstanding employee and institutional investors.
Purposes of Emerging Stock Board • For Investors: • To establish a legal trading platform for unlisted public companies • To provide investors an legal, safe, visible market • For Issuers: • To raise capital for funding organic growth • To be familiar with Corporate Governance and market rules • To increase visibility to investor public and business partners • To upgrade as a listed company • For GTSM: • To maintain a fair and orderly market for SMEs trading • To provide vital support for the SMEs to upgrade to TSEC/GTSM • To enhance the competitive capability of TW capital market
Companies Registering on Emerging Stock Board Number of new registered Number of yr-end registered 350 257 246 245 230 172 227 42 47 90 180 02 03 04 05 06 07
Companies Registering on Emerging Stock Board *Include companies applied in 2001, but listed directly in GTSM, 2002
Market Peculiarities • Market for not-listed-yet corp. • Quote-driven • Negotiation-based trading（market maker always as counterpart） • No Daily price fluctuation
Market Makers Investors Directly negotiating/trading over the counter Settled Deals Reporting Make orders/ Deals feedback GTSMEmerging Stocks Quoting /Trading System Brokers/ Dealers Quoting/orders execution Order inputs// Deals feedback Market quotes and trading info. Executed deals records GTSM Website/ Info. Vendors TDCC Market Trading Mechanism