SRI

Milano , Marzo 2008

MATERIALE NPV – RIPRODUZIONE VIETATA

 Macro Overview of Taiwan

Economic growth
 The economy of Taiwan enjoyed a moderate expansion throughout 2006, resulting 4.62% for the entire
year.
 Foreign demand contributed more to the growth of GDP than domestic demand.
 Benefiting from the steady expansion of the global economy, international trade continued to be Taiwan’s
principal growth engine in 2006. Net exports contributed 3.3% points to the change in real GDP.
 The total foreign trading value of the year was US$426.71 billion, up 12% from the previous year. Both
Taiwan export value and import value broke new records in 2006.
 Uncertain factors, such as cross-strait relations ( relation with China ), the extent of US economic growth,
fluctuating commodity prices, and the domestic political situation are also expected to impact the growth of
Taiwan’s economy.

Source: Taiwan Stock Exchange Annual report 2006

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Macro Overview of Taiwan

Status and Prospects

 The Taiwan stock market, with its fully automated trading systems and book entry mechanisms
 It ranks 1st among those regional markets whose listed companies are mostly active in the manufacturing sectors.
 At the end of 2006, the total market capitalization of the 688 companies listed on Taiwan Stock Exchange (TSEC)
amounted to US$594 billion.
 The market P/E ratio of the Taiwan market was 18.98, 3rd after the Shanghai Stock Exchange, the Shenzhen Stock
Exchange and the Tokyo Stock Exchange, making it an attractive marketplace for investors.
Competitive Edge
 An extensive, well-established network of industrial zones and a growing number of high-technology science parks,
supported by high-quality human resources and fully integrated supply-chain networks, form the foundations of
Taiwan’s industrial base.
 About 45% of the listed companies active in the dynamic and innovative electronics sectors.

 Taiwan’s small and medium-sized enterprises are known for their innovative approach to business. A strong work
ethic and a carefully managed economy have produced a nation of aspiring entrepreneurs. Taiwanese companies
have created their unique edge by advanced production processes, unparalleled manufacturing efficiency,
integrated services, and a spirit of innovation.
 An export-driven economy has brought Taiwan the experience needed to work with international companies,
placing the island in a pivotal position in the increasing integration of the Asia-Pacific region.

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 TAIEX (1997-2006)

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Market Access (1)

FDI
 The government has established an Investment Commission, under the Ministry of Economic Affairs, to
oversee matters relating to the screening and approval of direct investment and technical cooperation by
foreigners and overseas Chinese, as well as to oversee outward investment from Taiwan.
 According to the provisions of the current “Statute for Investment by Foreign Nationals”, to invest any
sum in a non-listed, non-OTC or non-emerging stock company in Taiwan, the foreign applicant has to
submit an application form enclosing the required documents to the Investment Commission.
Portfolio Investment
 With the growth of Taiwan’s stock market and the development of sounder systems, however, the
government has gradually relaxed these limitations on foreign investors.
 Since October 1 2003, the review process for investment by overseas Chinese and foreign investors in the
stock market has been changed from the ‘permit’ system to the ‘registration’ system. This has
consequently simplified the application procedures for foreign investment in Taiwan’s stock market.

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Market Access (2)

Registration
 Foreign investors are required to register with the TSEC so as to obtain an “Investor ID” before opening a
trading account with a local securities firm.
 According to Article 10 of “Regulations Governing Investment in Securities by Overseas Chinese and
Foreign Nationals”, Article 77- 4 of “Operating Rules of Taiwan Stock Exchange Corporation” and Article
44-4 of “Operating Rules of Taiwan Futures Exchange Corporation”, the qualifications for foreign investors
are as follows:
1. FINI : institutions incorporated outside the territory of the Republic of China
　① Funds: Company Funds, Trust Funds, Partnership Funds, Pension Funds, Mutual Funds, Unit Trusts

and other types of funds 　

② Non-funds: Banks, Insurance Companies, Securities Firms, Futures Commission Merchants, others
2. FIDI : foreign persons who hold any nationality except Mainland Chinese, who are at least 20 years old,
and who hold an identification certificate
 FINI and FIDI should appoint a domestic agent or representative (usually a custodian bank) to handle the
registration process. Upon submission of the online registration form, TSEC immediately emails foreign
investors' agent or representative a "Certificate of Registration Completion" with "Investor ID" and "Tax ID"
.

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Market Access (3)

Opening a Trading Account in a Securities Firm

 The custodian bank may open a trading account with a local securities firm on the same day of registration
upon submission of the following documents:
1. Power of attorney to agent or letter of appointment to representative
2. Copy of identification card or residence certificate of the domestic agent or representative, or copy of
the documents proving company establishment
3. Certificate of Registration Completion
 MTA
The FINI who meets one of the following conditions may open two or more investment transaction
accounts, respectively, in the same brokerage firm (including each branch office):
1. The investment strategy calls for operation by an external manager
2. The internal investment operation uses different transaction platforms, e.g.:
　 ‧ Different branches of the applicant
　 ‧ Separate trading units or different traders within the applicant‘s organization
　 ‧ Segregation of applicant’s proprietary and brokerage position
　 ‧ Portfolios under different insurance policies
3. External account administrators (global custodian banks or brokers) are assigned to operate and
manage accounts
4. Other situations approved by the FSC

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Limitations (1)

Remittance
 Under current regulation, foreign investors are divided into two categories: foreign institutional investors
(FINIs) and foreign individual investors (FIDIs). While FIDIs are subject to a US$5 million investment
quota, FINIs can enjoy an investment quota without any upper limit.
 After receiving permission to invest in Taiwan, foreign investors may apply to remit investment capital and
investment earnings out of the ROC. However, outward remittances of capital gains and stock dividends
may be made from realized earnings only.
 Applications for foreign exchange remittance for investment capital and earnings are handled in
accordance with the "Act for the Regulation of Foreign Exchange" (under the purview of the Central Bank).
 When a foreign investor intends to repatriate investment earnings, the investor's agent or representative
submits documents including a tax return and a certificate of payment of tax, and carries out the exchange
settlement in accordance with the "Act for the Regulation of Foreign Exchange". During a period when
assessment of ROC income tax on capital gains from securities transactions is suspended, the agent or
representative may submit a tax clearance certificate from the tax authorities and carry out the exchange
settlement in accordance with the "Act for the Regulation of Foreign Exchange".

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA

 Limitations (2)

Money Market Instruments

 Inwardly remitted funds not yet invested in eligible securities can be invested in government bonds, time
deposit certificates, money market instruments, money market funds and other derivatives such as futures
and options. The total amount which may be invested in these instruments is limited to 30% of the total
remitted funds.
 Money market instruments are limited to bills with remaining expiration days of less than 90 days.

Shareholding Caps.
 Taiwan has no limits on total/individual foreign shareholding in public companies. Applicable acts and
regulations may in a few instances limit the percentage of equity holdings by foreign nationals in
companies in certain industries (such as the postal industry, telecommunications, and shipping) to meet
policy needs related to national interests in the economic, social, or cultural spheres. Most developed
countries have similar policies, and the practice in Taiwan is in line with developed-market standards.

2008 93 - SRI MATERIALE NPV – RIPRODUZIONE VIETATA