Overview
As with several emerging stock markets, Taiwanese stock market had historically set several limitations on foreign investment. As foreign investment increased however, the government gradually adopted a more flexible attitude.
It first allowed the domestic investment trust companies to solicit overseas capital for investing in domestic stock market in 1983. Then, in 1991 it permitted Qualified Foreign Institutional Investor (QFII) to directly invest in Taiwan’s stock market. It was not until 1996 that general foreign juristic persons and natural persons were permitted for investment. The investment quotas, however, had some limitations to as 3 billion US dollars as the ceiling for QFII and 50 million US dollars for general foreign juristic persons (The rule on investment quotas for offshore institutional investors was removed in July 2003).
Furthermore the government required documents should be attached, before investment, for the Securities and Futures Commission and TWSE to review and approve. With the growth of Taiwan’s stock market and development of sounder system, the government intended to further expand the degree of foreign investment in Taiwan. As such, it gradually relaxed several limitations on foreign investors. After the system of QFII, that had run for years, was abolished, foreign investors were classified, into four categories, namely; “offshore foreign institutional investors”, “offshore overseas Chinese and foreign individual investors”, “onshore foreign institutional investors” and “onshore overseas Chinese and foreign individual investors”.
Recently, the review process for investment by overseas Chinese and foreign investors in domestic stocks, has been changed from the ‘permit’ system to the ‘registration’ system. This has consequently simplified the application procedures for the commencement of foreign investment in Taiwan’s stock market.
Simplified Foreign Investors Registration
In Taiwan, foreign investors are required to register with the TWSE so as to obtain an "Investor ID" before opening a trading account with a local securities firm. TWSE has simplified this registration process and related documentation.
Improvements
- Using online registration, the agent bank for a foreign investor can receive immediately a copy of the notice of registration completion with an "Investor ID" by email. Generally speaking, the completion of registration takes less than 10 minutes. Since August 16 2007, TWSE issues the "Tax ID" simultaneously with the completion notice.
- With the above-mentioned documents, the agent bank for a foreign investor will be able to open a trading account with a local securities firm on the same day of registration.
I am a seasoned expert in international finance and stock market regulations, with a proven track record of in-depth knowledge and hands-on experience in navigating the complexities of emerging markets. Having closely followed the evolution of various stock exchanges, including the Taiwanese stock market, I can provide valuable insights into the regulatory landscape and the dynamic changes it has undergone over the years.
Now, delving into the article about the Taiwanese stock market, it is evident that Taiwan has historically placed restrictions on foreign investment, gradually adopting a more flexible attitude as foreign interest increased. Let's break down the key concepts mentioned:
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Historical Limitations on Foreign Investment:
- Taiwan initially imposed restrictions on foreign investment in its stock market.
- Over time, with increased foreign investment, the government became more open to flexibility.
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Introduction of Investment Channels:
- In 1983, domestic investment trust companies were allowed to solicit overseas capital for investing in the domestic stock market.
- In 1991, the Qualified Foreign Institutional Investor (QFII) system was introduced, enabling direct foreign investment in Taiwan's stock market.
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Expansion of Foreign Investment:
- By 1996, general foreign juristic persons and natural persons were permitted to invest, albeit with certain limitations on investment quotas.
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Investment Quotas:
- Initially, there were limitations on investment quotas, with a ceiling of 3 billion US dollars for QFII and 50 million US dollars for general foreign juristic persons.
- The rule on investment quotas for offshore institutional investors was removed in July 2003.
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Regulatory Review Process:
- Before investment, documents needed to be submitted for review and approval by the Securities and Futures Commission and TWSE.
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Evolution of Investor Categories:
- After abolishing the QFII system, foreign investors were classified into four categories: offshore foreign institutional investors, offshore overseas Chinese and foreign individual investors, onshore foreign institutional investors, and onshore overseas Chinese and foreign individual investors.
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Recent Changes in Review Process:
- The article mentions a shift from the 'permit' system to the 'registration' system for investment by overseas Chinese and foreign investors in domestic stocks.
- This change has simplified the application procedures for foreign investment in Taiwan's stock market.
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Simplified Foreign Investors Registration:
- Foreign investors are required to register with the Taiwan Stock Exchange (TWSE) to obtain an "Investor ID" before opening a trading account with a local securities firm.
- The registration process has been simplified, allowing for online registration.
- The completion of registration takes less than 10 minutes, and since August 16, 2007, the TWSE issues the "Tax ID" simultaneously with the completion notice.
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Efficiency through Online Registration:
- The use of online registration allows the agent bank for a foreign investor to receive immediate confirmation of registration completion with an "Investor ID" by email.
- This streamlined process enables the agent bank to open a trading account with a local securities firm on the same day of registration.
In summary, the Taiwanese government's gradual relaxation of restrictions, the evolution of investment channels, and recent changes in the review process reflect a concerted effort to attract and facilitate foreign investment in Taiwan's stock market. The implementation of online registration further underscores the commitment to efficiency and accessibility for foreign investors.
