Taiwan’s regulators are in the final stage of reviewing a proposal to allow private equity funds, said Chang, speaking at Fund Forum Asia 2017 in Hong Kong.
Once the tax issues are resolved, regulators may allow fund managers to launch private equity funds in the next few months, he said.
Sitca hopes that if the proposal is approved, both institutional and high-net-worth investors in Taiwan will be allowed to invest in PE funds.
According to Chang, private equity fund approval would come at the right time. The low interest rate environment in Taiwan has prompted local institutional investors to seek high yield investment opportunities overseas.
In Taiwan, offshore funds have become more popular than onshore funds, according to Chang. Assets in offshore funds stood at around $103bn as of end-March, accounting for 46% of Taiwan’s $224bn fund management industry.
Onshore fund assets had around $73bn, accounting for just 30% of the industry. The remaining assets are managed by discretionary mandates, Chang noted.
Chan said that fixed income funds dominate the offshore fund market, accounting for half of all offshore assets. Most of these fixed income funds are high yield bond funds, which have been popular in Taiwan since 2008.
Stock market growth
Besides private equity funds, Sitca is proposing that regulators approve the launch of the Taiwan Individual Savings Account (TISA).
The initiative is similar to Korea’s ISA, which was launched in the first half of 2016, and Japan’s Nippon ISA, which was launched in 2014, according to Chang.
TISA will allow investors, both Taiwan citizens and foreign nationals living in Taiwan, to invest in listed securities on the Taiwan Stock Exchange with a reduction in capital gains tax, Chang said.
A reduction or exemption of capital gains tax can increase investment returns of these investors. He expects the government to approve the TISA initiative as early as this year.
When rolled out, the TISA should result in hiigher capital inflows, boosting Taiwan’s stock market and increasing assets of onshore mutual funds.
Trading volume in Taiwan’s stock market has been slowing, according to Chang. Data from Taiwan’s bourse shows that trading volume decreased by 17% to 438.3 billion shares in 2016 from 530.7 billion shares in 2012.
He also believes TISA could encourage local equity market listings. Currently some companies prefer to list on other bourses such as China instead of Taiwan, he added.