The two bourses said they will look into a link that can provide members of each of the exchanges with an efficient, cost-effective and direct way of trading, clearing, settlement and custody arrangements.
“International investors keen on Greater China opportunities are coming to Singapore and Taiwan because we are leading offshore renminbi centres,” said Magnus Bocker, chief executive of SGX.
“There is therefore potential for cooperation in [bourse] infrastructure and other areas so as to better serve these investors.”
The SGX-TWSE announcements comes at a time when Hong Kong and China are very close to launching the Shanghai-Hong Kong Stock Connect programme.
The initiative is viewed as an important regulatory step in opening up the China capital markets.
Apart from product diversification, the arrangement is seen to help promote the internationalisation of the renminbi (RMB) and the development of Hong Kong as an offshore RMB business centre.
Hong Kong is still the undisputed number one offshore RMB payments centre with a 71% market share, but its leadership position has dropped by around 10% over the last three years. Meanwhile, London and Singapore are working to establish themselves as strong alternatives, though their market share is comparatively minor.
Fred DiCocco, Asia-Pacific head of sales and relationship management for BNY Mellon’s treasury services business, thinks London and Singapore will emerge as the two dominant offshore RMB hubs alongside Hong Kong by 2020.
“Many expect Singapore will play a similar role in RMB trading as China gradually opens up its capital markets and liberalises its currency. Singapore’s rapid ascendancy has been fuelled by the fact that offshore RMB growth to date has been driven primarily by trade finance settlement,” DiCocco said.
The TWSE lists 814 stocks, exchange traded funds, warrants and Taiwan Depository Receipts.
SGX said it has offered MSCI Taiwan futures for 18 years. It also lists China A50, and AsiaClear iron ore futures, and 770 stocks including RMB shares.
Sush-der Lee, chairman of TWSE said: “TWSE and SGX have built a broad consensus around expanding international cooperation. The signing of the letter of intent is a practical mechanism for facilitating cross-border trade and will enable TWSE and SGX to provide more diversified services to their respective market investors.”