Taiwan approves China financial investment rules

By Faith Hung

TAIPEI (BestGrowthStock) – Taiwan’s top financial regulator has formally announced guidelines on investments between local and Chinese financial institutions, boding well for acquisition opportunities in cross-strait financial industries.

The Financial Supervisory Commission said in a statement on Tuesday that among the guidelines, single mainland banks would not be allowed to take more than a 5 percent stake in any Taiwanese bank, while Taiwan banks would not be allowed to invest more than 15 percent of their book value in Chinese banks.

Thirteen local financial holding companies, including Cathay Financial Holding (2882.TW: ) and Chinatrust Financial Holding (2891.TW: ), were qualified to invest in China, the commission told reporters.

Reuters had reported earlier in March that the government would approve the guidelines, which followed a historic financial services pact with China that took effect in January.

Trade ties between Taiwan and China have improved since President Ma Ying-jeou took office in 2008, but the island had been reluctant to open its financial services sector to Chinese investment on concerns over Chinese dominance.

NOT ENOUGH

Under the guidelines, Chinese banks could not buy stakes in Taiwanese counterparts immediately, but five Chinese lenders could open representative offices for now, the commission said.

The five lenders included Bank of China (3988.HK: )(601988.SS: ) and Industrial and Commercial Bank of China (ICBC) (1398.HK: ) (601398.HK: ), it said.

However, not everyone was convinced the rules would be enough for Chinese banks interested in investing in Taiwan’s financial institutions.

“Chinese banks are simply not interested in taking a 5 percent stake in a Taiwan bank. A 20 percent stake, maybe,” K.S. Lin, president of Taishin Financial Holding (2887.TW: ), told reporters on Tuesday.

China Merchants Bank (3968.HK: ) (600036.SS: ) said recently it had applied to open an office in Taiwan. ICBC was in talks to buy a stake in Cathay Financial, Taiwan’s top financial holding firm, in a potential $3.4 billion deal, sources told Reuters in January.

China Construction Bank’s (601939.SS: ) (0939.HK: ) chairman said in November that the bank was interested in tapping Taiwan’s market, via either acquisitions or by establishing branches.

Taiwan financial sub-index (.TFNI: ) rose 0.93 percent on Tuesday, outperforming the main index’s (.TWII: ) 0.8 percent rise.

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Taiwan approves China financial investment rules