The Development in Taiwan Capital Market Fiona Su

The Development in Taiwan Capital Market Fiona Su Deputy-Director Securities and Futures Bureau, FSC, Taiwan September 2006 Financial Supervisory Commission 1

Content § § § § Introduction Outlook of Economy Role of Financial Supervisory Commission Principal and Alternative Stock Markets Principal Derivatives Market Bond Market Highlight of Market Performance Recent Important Measures Financial Supervisory Commission 2

Introduction One of the East Asia’s economies § § Geographic center Comprehensive industrial infrastructure Human resource research and development capabilities Financial Supervisory Commission 3

Outlook of Economy § the 144 th member of the World Trade Organization (WTO) § IMD’s report, “World Competitiveness, ” Taiwan’s overall competitiveness ranked 11 § Rank the top 5 competitive countries according to the WEF Global Competitiveness Report 2005 -2006 § As of June 2006, the foreign exchange reserves hit US$260. 93 billion, ranked the 3 rd in the world § The economic growth of 2006 May forecasted 4. 28%. Financial Supervisory Commission 4

Role of Financial Supervisory Commission Executive Yuan Financial Supervisory Commission 5

Financial Supervisory Commission Executive Yuan § Background • Established on July 1, 2004 • One single integrated institute, consolidating financial supervision of insurance, securities, futures and banking affairs § Organization Structure • Of nine commissioners, one appointed as Chairperson and two as Vice Chairpersons • 4 Departments, 4 offices • 4 Bureaus: Banking Bureau, Securities and Futures Bureau, Insurance Bureau and Financial Examination Bureau Financial Supervisory Commission 6

Securities Market Structure Financial Supervisory Commission 7

Principal and Alternative Stock Markets § Taiwan Stock Exchange Corp (TSEC) and Gre. Tai Securities Market (GTSM) § The daily price limit § Clearing and settlement § Multilateral net clearing and T+2 rolling settlement convention § New products: ETF, REITs, REATs, CBO, ABS, MBS, SP Financial Supervisory Commission 8

Principal Derivatives Market § Taiwan Futures Exchange (TAIFEX) established in 1998. § Products: § NT$: 5 equity index futures, 2 interest rate futures, 3 equity index options, 35 equity options § US$: 1 equity index futures, 1 equity index option and 1 gold futures § Trading system: In-house developed Electronic Trading System (ETS) Financial Supervisory Commission 9

Bond Market § GTSM was authorized to take over fixed-income market since 1994. § EBTS (Electronic Bond Trading System )was implemented in July 2002. • Set up a real time and transparent benchmark indicator • Expand repo-trading function into the system in March 2005. § New OTC products: bond derivatives and foreign currency denominated bond § New trading mechanism: bond lending, margin trading Financial Supervisory Commission 10

Highlight of Market Performance § Stock Market • The market capitalization amounted to USD 0. 48 trillion with a total of 692 TSEC-listed companies at the end of July 2006 • Market Value to GDP in Stock Market is 140. 5% at the end of July 2006 • The trading value summed total USD 0. 45 trillion from Jan. to July 2006 • Turnover rate 147. 3% No. 3 in Asia; No. 8 globally (from Jan. 2006 to July 2006) Financial Supervisory Commission 11

Highlight of Market Performance n Futures Market n Rapid growth of trading volume n n n Reached 92 million contracts Options accounted for 89% Ranked 18 th on trading volume Awarded “Derivatives Exchange of the Year 2004” by Asia Risk Magazine in Oct. 2004 TAIEX Options ranked 3 rd by Trade Data Global Service in 2005 Financial Supervisory Commission 12

Highlight of Market Performance • Bond Market • By the end of July 2006, the turnover reached USD 3. 2 trillion. • Outright trades amounted to USD 1. 64 trillion and repo/reverse repo trade counts USD 1. 56 trillion. • Government bond outright trading takes 98% of total outright trading. Financial Supervisory Commission 13

Securities Market Overview Financial Supervisory Commission 14

Securities Market Overview Financial Supervisory Commission 15

Foreign Investors Participation Accumulated Net Remitted-In Capital of FINIs Financial Supervisory Commission 16

Securities Market Overview History of stock market value held by foreign investors Financial Supervisory Commission 17

Recent Important Measures • Securities Market ü promote corporate governance of the listed companies üSecurities borrowing and lending (SBL) üFinancing for settlement üUnderwriting system Financial Supervisory Commission 18

Recent Important Measures • Securities Market ü Expanded the business scope of securities firms üWealth Management Business üBorrowing and lending securities and money üConcurrent operation of SITEs and SICEs üDeregulation on Foreign Investors Financial Supervisory Commission 19

Recent Important Measures • Bond Market üCompile Taiwan Government Bond Index (GTSM) üIntroduce Strip trading of financial debenture, corporate bond and government bond üBuild International Bond Market Financial Supervisory Commission 20

Recent Important Measures § Futures Market • Introduction of Omnibus Accounts • Allowing Trading for Non-Hedging Purpose • Launched US dollar denominated products • Reduction of margin requirements • Improvement measures on the government bond futures Financial Supervisory Commission 21

FSC Vision l Establish Taiwan as the regional fund raising center and the asset management center l Promote Taiwan’s financial institutions as regional, even global players l Build Taiwan as the regional gateway for financial services Financial Supervisory Commission 22

Thank You SFB website: //www. sfb. gov. tw Email: fiona@sfb. gov. tw Financial Supervisory Commission 23