Taiwan aims to set up first US dollar bond exchange

TAIPEI - Taiwan is aiming to set up its first exchange to list US dollar-denominated bonds issued by foreign firms, in its latest effort to boost its capital markets and keep in line with global trends, the top financial regulator told Reuters.

Morgan Stanley and AT&T are among those global names that have sold US-denominated bonds in Taiwan, mostly to local insurance firms. However, the Financial Supervisory Commission (FSC) says a bond exchange is necessary to make capital markets more active. "We're studying proposals to have insurers take a certain portion of their bond positions to trade... We're aiming to reach a conclusion late this year," the FSC chief William Tseng said in an interview late on Friday. "The point in the future is to set up a secondary market,"he said, adding London already has such a bond exchange.

Taiwan, once criticised for not being open enough to foreign investors, has eased some major financial regulations since Tseng became the FSC chief in 2013.

Among them were building Taiwan into a wealth management hub in Asia, making it easier for bonds to be issued by foreign companies and Chinese banks and raising the limit for insurance firms to invest overseas.

Taiwan's yuan-denominated "Formosa bonds," which are sold by Chinese banks here and the equivalent of Hong Kong's "Dim Sum bonds," have also been growing thanks to the improved business ties with China.

China Development Bank, the mainland's biggest development bank, will sell Formosa Bonds in the second half of 2015, a source told Reuters last month.

When being asked if the FSC would approve that, Tseng said"We welcome them (China Development Bank)." Currently, Bank of China and other big mainland banks have sold Formosa bonds, using their offshore branches.

The top financial regulator expects new issues of US dollar-denomated and yuan bonds to increase by US$5 billion - US$10 billion (S$6.8 billion - S$13.5 billion) at the end of 2015, compared with current outstanding of around US$40 billion.