Macro Economic Analysis Taiwan 530
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Socially Responsible Investments in APAC emerging markets State of the art updated on may 21, 2008
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN TAIWAN
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
2
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
TAIWAN AT A GLANCE
Territory - 31,688 km2 Population - 22.95 million Capital - Taipei Government System - Democracy Administrative Divisions - 2 municipalities / 16 counties / 5 provincial cities Currency - TWD, semi-flexible exchange rate, 1 EUR = 47.865TWD (2008.05.23) Languages - Mandarin, Taiwanese Ethnicities - Han (92%) and Taiwanese aborigines (2%) Religion Buddhism, Islam, Taoism, Christianity
3
Source : China Statistical Yearbook, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
TAIWAN AT A GLANCE - ECONOMIC DEVELOPMENT Taiwan GDP 2000 - 2008 USD Million
GDP (million US)
350,000
Taiwan is the 21th largest economy in the world (2006*)
Considering the GDP per capita, Taiwan is the 36th in the world in 2006 ( at $USD 16,274 )
Taiwan’s 2007 GDP amounted to $USD 383,303 million, along with a consistent growth since 2002. The CAGR of Nominal GDP in 2000-2007 is ??? %
Taiwan’s growth has consistently (except 2001) been higher than CPI inflation, indicating a positive real growth
Economic Outlook for 2008:
GDP Growth Rate
450,000 400,000
% 7.00
413,164 6.15
5.77 321,230 291,694
300,000
365,503
355,958 4.64 297,668
6.00
383,303 5.70
5.00
4.89
331,007 305,624
4.32
4.16
4.00
3.50 3.00
250,000
2.00 200,000
1.00
150,000
0.00
100,000
-1.00
50,000
-2.00
-2.17
0
-3.00 2000
2002
5.77
2006
2007
2008 E
4.32 3.86
4.16
0.00
2000
-0.01 -0.20 -0.28 2001 2002 2003 2004
Taiwan’s export is anticipated to mildly
1.80
1.61
1.25
0.60 2005
2006
increase. With the improving domestic 2007
2008E*
2008 05 21 – SRI in APAC Emerging Markets
sector contribution, real GDP is predicted to grow by 4.32% in 2008.
-2.17
-3.00
Source :DGBAS, NPV analysis
shows that the growth of global economy may be moderately slow in 2008.
2.31
2.00
The latest world economic projection
5.70 4.89
3.50
3.00
-2.00
2005
4.64
4.00
-1.00
2004
6.15
5.00
1.00
2003
GDP Growth rate and CPI¹ 2000-2008
7.00 6.00
2001
4
*: until 2008/ April MATERIALE NPV – RIPRODUZIONE VIETATA
INDEX
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
5
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - HISTORY
Over the second half of the 20th century, Taiwan has transformed itself from a predominantly agrarian economy into a vigorous industrialized economy, a process that may be summarized in three main phases:
Taiwan’s economy transform has gone through three phases of development:
Phase 1: 1949 to 1980 Shift from Agriculture to Manufacturing
Phase 2: 1981 to 1999 Ongoing Industrial Development
Phase 3: from 2000 onwards Reform for Sustainable Development
In 1949, the Central Bank relocated with the government from Mainland China to Taipei . A highly successful land reform program launched Commonly, bonds issued by the government as compensation for the agricultural lands confiscated and redistributed were utilized by the former landlords as collateral to secure loans with which they started up manufacturing and other businesses.
Beginning in the 1980s, the government implemented a series of measures to liberalize and internationalize the economy and privatize state-run enterprises. Labor-intensive industries, once the mainstay of Taiwan's economy, gave way to technology- and capital-intensive industries.
Globalization, trade liberalization, and the rise of neighboring China as an economic power pose new challenges for Taiwan's economic development in the new century. To meet them, the government has taken measures to upgrade Taiwan's industries, implemented financial reforms to foster a more attractive investment environment.
6
Source :Taiwan Yearbook 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - RECENT DEVELOPMENT
2 phase financial reforms have been conducted from 2000 :
Background
Taiwan opened its market for new banks in the early 1990s. As a result, 16 new banks were established and left behind an “over-banking” problem. More specifically, while market competition stimulated the development of the financial markets, the overly competitive banking market deteriorated banks’ asset quality, narrowed their interest spread and reduced profit margin from them.
For example, the market share of the top 5 banks in Taiwan only accounts for 38%, while the figures in Korea and Hong Kong are 87% and 76% respectively. In other words, Chinese Taipei lacked big and good banks.
Over-regulation was another problem in our financial market. Previously, banks were considered as policy tools aiming to support our manufacturing industry. This situation inevitably restricted the effectiveness of market mechanism and limited the competitiveness of our financial markets. PhaseⅠof Financial Reform (started in 2000)
The goal of the first reform aimed at resolving the non-performing loan problems.
For the purpose, the previous financial regulator, the Ministry of Finance (MoF), lowered business tax of financial institutions from 5% to 2% and the Central Bank lowered deposit reserves to encourage bad debt write-offs.
The Ministry of Finance established the Financial Restructuring Fund (or RTC fund) and created Asset Management Companies to deal with distressed financial institutions and resolve their deteriorated assets.
Source :Financial Supervisory Commission , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets
7
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - RECENT DEVELOPMENT
The MoF enacted the Financial Institution Merger Act and the Financial Holding Company Act to create a better M&A legal environment and lessen the adverse effect of over-banking.
The results of the first reform are significant. The average NPL ratio of domestic banks reduced from 11.27% in 2001 to 2.39% in June 2006.
In addition, 14 financial holding companies have been established since 2001. However, since there are only few M&A deals in recent years, the number of our banks is still large.
To promote integrated financial supervision, we have also enacted a law aiming at the integration of several supervisory agencies. The Financial Supervisory Commission was established on July 1, 2004 to consolidate the supervision of banking, securities and insurance sectors, and to act as a single regulator under the Executive Yuan. PhaseⅡof Financial Reform (started in 2004 till now)
The key objective of phaseⅡfinancial reform is consolidation and promoting Taiwan as a regional fund-raising and asset management center.
The four goals of market consolidation are: (1) three banks with market share over 10% by the end of 2005; (2) halving the number of state-owned banks by the end of 2005; (3) reducing FHCs (4)financial institutions with foreign investment.
To speed up financial M&As, the FSC has been trying to create an environment beneficial for consolidation, not only for domestic financial institutions but also for foreign investors.
It revises outdated regulations to be in line with international norms, implements differentiated supervisory measures to encourage well-performing financial institutions, and offers incentives for consolidation. . 8
Source :Financial Supervisory Commission , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - BREAKDOWN OF FINANCIAL SERVICE INDUSTRY % Of Total Nominal GDP 10.04
2007
9.98
2006
10.43
2005
10.52
2004
10.56
2003 0%
20% Financing
40% Insurance
60%
80%
100%
Securities and Futures
•
Financial Service Industry accounts for around 10% of total GDP.
•
Financing, Insurance, and Securities and futures represents 65.7%, 24.6% and 9.7% of total financial market.
•
Financing has been decreasing gradually from 2003-2007 9
Source :CSRC, CBRC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW GDP & Capitalization (2002-2007) NTD (billion)
25000
180.00% 160.00%
20000
140.00% 120.00%
15000
100.00% 80.00%
10000
60.00% 40.00%
5000
20.00% 0
0.00%
2002
2003 GDP
2004
Market Capitalization
2005
2006
2007
Stock Market Capitalization To GDP Ratio
•
Market Capitalization start to surpass GDP from 2003
•
Market Capitalization is growing faster than GDP
•
Stock Market Capitalization to GDP Ratio keeps growing from 2002 (89.22%) to 2007 (171%)
Source :Taiwan Stock Exchange , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets
10
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN TAIWAN
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
11
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
- STRUCTURE 1/5 BANKING SECTOR
Executive Yuan
Financial Supervisory Commission ( Regulator )
Central Bank of R.O.C (Taiwan)
Banking Bureau Domestic Banks
Local Branches of Foreign Banks
Securities and Futures Bureau Insurance Bureau Financial Examination Bureau
Credit Cooperatives
Taiwan Post Co.
Supportive Departments : - International Affairs Departments - Legal Affairs Department - General Planning Department - IT Department - Secretary Office
Credit Departments of Farmers’ & Fishermen’s Associations
12
Source :FSC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - STRUCTURE 2/5 Central Bank - Central Bank of the Republic of China (Taiwan)
In December 1949, the Bank relocated with the government from Mainland China to Taipei
In November, 1979, the newly revised Central Bank of China Act was promulgated. While the Bank has since been under the Executive Yuan (Cabinet), its independent role in making monetary policy has not been changed.
the Bank's operational objectives include promoting financial stability, ensuring sound banking operations, maintaining the stable internal and external value of the currency and, within the scope of the above three objectives, fostering economic development.
The main functions of CBC:
Monetary Management
Foreign Exchange Management
Clearing and Settlement Service
Currency Issuance
Treasury Agency Functions
Bank Examination
Statistics and Research
Participation in International Organizations ;
13
Source :CBC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - STRUCTURE 3/5 Regulator: Taiwan Financial Supervisory Commission
Financial Supervisory Commission (FSC) was inaugurated and commenced operation since 1 July 2004 .
FSC functions act as a single and independent regulator that directly reports to the Executive Yuan.
Main goal : consolidate the supervision of banking, securities and insurance industries under one roof, as well as to integrate the tasks of examining these industries.
The FSC includes 4 bureaus and 5 supporting departments.
4 bureaus - The Bureau of Monetary Affairs - The Securities and Futures Bureau
}
responsible for the supervision of financial institutions.
- The Insurance Bureau - The Examination Bureau is in charge of the examination of all financial institutions.
It is worth mentioning that the newly organized Examination Bureau integrates examination staff from the CBC*, BOMA** and the CDIC***, which provides better administrative and human resources to conduct financial examination under one agency.
5 supporting departments - International Affairs Departments - Legal Affairs Department - General Planning Department - IT Department - Secretary Office
* CBC : Central Bank of Republic of China (Taiwan) ** BOMA : Bureau of Monetary Affairs *** CDIC : Central Deposit Insurance Corporation
2008 05 21 – SRI in APAC Emerging Markets
14
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - BANKING ASSETS AND LIABILITIES
billion TWD
45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 2003
2004
2005
2006
2007
•
As of the year-end 2007, the total assets of the banking sector amounted to TWD 38235 billion, an increase of RMB 501 billion from 2006.
•
During the same period, the total liabilities reached TWD 36069 billion, an increase of TWD 433 billion. 15
Source :CBRC 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - FINANCIAL INSTITUTIONS ASSETS BREAKDOWN
2007
Domestic Bank Local branch of foreign banks
2006
Credit Cooperatives Bills Finance Companies
2005
Trust and Investment companies Credit Departments of Farmers' Associations
2004
Credit Departments of Fishermen's Associations The Postal Savings System
2003
0%
20%
40%
60%
80%
100%
•
Domestic banks occupy the majority of total asset and account for 72.8% of total.
•
Local branch of foreign banks keep increasing
•
Credit Cooperatives, Bills Finance Companies and Trust and Investment company are decreasing gradually.
•
Credit Departments of Farmers' and Fishermen’s Associations have no significant change 16
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - DEPOSITS AND LOANS billion NTD
30 000
73.0%
25 000
72.0% 71.0%
20 000
70.0%
15 000
69.0%
10 000
68.0%
5 000
67.0%
0
66.0% 2003
2004 Deposit
2005 Loan
2006
2007
Loan to Deposit Ratio
•
As of the year-end 2007, total deposits and total loans outstanding amount to 25245 and 18019 billion, respectively
•
Loan to Deposit Ratio keeps at about 70% in the latest 4 years 17
Source :FSC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - NPLs1 OF DOMESTIC BANKS Billion TWD
900
6.00%
800
5.00%
700 600
4.00%
500
3.00%
400 300
2.00%
200
1.00%
100 0
0.00% 2003
2004
2005 Total NPL
2006
2007
NPL Ratio
•
The quality of assets improved dramatically due the Financial Reform from 2000.
•
By the end of 2007, the NPLs of major commercial banks totals TWD 337.4 billion, a decline of TWD 38 billion from end-2006. The NPL ratio was 1.79 percent, with a decrease of 0.8% 18
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
Note 1: Non-Performing Loans MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - ROA and ROE of Domestic Bank 12 10 8 6 4 2 0 -2
2003
2004
2005 ROA
2006
2007
ROE
•
ROE reduced dramatically from 10.3% (2005) to -0.43% (2006)
•
ROA and ROE decrease from 2005 due to Double-card debt crisis (credit card / cash card ) and over competition.
19
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
Note 1: Non-Performing Loans MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
20
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
- STRUCTURE 1/5 Stock Market
Financial market
Taiwan Stock Exchange / TSEC
GreTai Security Market / GTSM
(exchange market)
(OTC market)
Stock
Stock
TDR (Taiwan Depository Receipts)
Emerging Stock
Warrant
Bond
Bond
Derivative
Beneficiary Certificates ETF Beneficiary Securities
21
Source :TSEC, GTSM , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - REGULATOR ( Exchange Market ) Taiwan Stock Exchange / TSEC
The CSRC was founded in 1992. It is an institution of the State Council of the People's Republic of China (PRC). It is the main security (finance) regulator that responsible for conducting supervision and regulation of the securities markets in accordance with the law
In August 1997, The State Council decided to put the securities markets in Shanghai and Shenzhen under the supervision of the CSRC
In November 1998, Organizations engaged in securities formerly supervised by the People's Bank of China were put under the centralized supervision of the CSRC
Product and Service Stock / TDR (Taiwan Depository Receipts) / Warrant / Bond /Beneficiary Certificates / ETF/ Beneficiary Security
Its responsibilities include:
Formulating policies, laws and regulations concerning markets in securities and futures contracts;
Overseeing issuing, trading, custody and settlement of equity shares, bonds, investment funds;
Supervising listing, trading and settlement of futures contracts;
Supervising futures exchanges; securities and futures firms;
Granting the qualification of law firms, accounting firms, asset appraisal firms, and professionals in these firms 22
Source :CSRC 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - REGULATOR ( OTC Market ) GreTai Security Market / GTSM
The government reopened the over-the-counter trading of bonds in October 1982.
The Taipei Securities Dealer's Association (TSDA) started handling over-the-counter trading of stocks in February 1988.
In 1994, this non-profit organization with the mission to develop the over-the-counter market was named Gre Tai Securities Market (the GTSM)
Since its inception in 1994, GreTai Securities Market (GTSM) has been endeavoring to play the role of a family and aspires to be the "protagonist of economic vitality and the cradle of successful businesses" to help businesses grow and develop, drive the upgrade of industries and enhance competitiveness in the international markets.
Product and Service Stock / Emerging Stock / Bond / Financial Derivative
23
Source :GTSM, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - OVERVIEW billion TWD
40000 35000 30000 25000 20000 15000 10000 5000 0 2003
2004 Capital Issued
2005 Market Capitalization
2006 Trading Value
2007
•
From 2003-2007, Taiwan stock exchange market has grown consistently and stably.
•
In 2007, the market capitalization reaches 21,527 billion TWD and growth rate is 11.1% from 2006.
•
In 2007, the Trading Value reaches 33,527 billion TWD and growth rate is 38.6% from 2006
•
In 2007, the Capital Issued reaches 5601 billion TWD and growth rate is 1.4% from 2006 24
Source :FSC Financial Outlook Monthly, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - COMPARISON BETWEEN EXCHANGE AND OTC MARKET Number of Listing
Market Capitalization TWD (Billion)
800
25000
700 600
20000
500
15000
400 300
10000
200 100
5000
0 2003
2004
2005 GTSM
2006
2007
0 2003
TSEC
2005
GTSM
Trading Value
TWD (Billion)
2004
2006
2007
TSEC
Trading Volume TWD (Billion)
40000
120000
35000 30000
100000
25000
80000
20000
60000
15000
40000
10000
20000
5000 0
0 2003
2004
2005 GTSM
2006
2007
TSEC
2003
2004
2005 GTSM
2006
2007
TSEC
•
TSEC and GTSM occupy 91.89% and 8.11 % of the Market Capitalization respectively in 2007.
•
TSEC and GTSM occupy 85.56% and 14.44 % of the Market Capitalization respectively in 2007
•
TSEC and GTSM occupy 85.80% and 14.20 % of the Market Capitalization respectively in 2007. 25
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - MARKET PERFORMANCE 2007 TAIEX and Trading Volume
•
In the first 3 quarters of 2007, both TAIEX and GTSM Index keeps the growth momentum in the previous year
•
TAIEX opened at 7920 and closed at 8509.56, with a rate of yearly increase 7.39% in 2007.
•
GTSM Index opened at 164.71 and closed at 154.47, with a rate of yearly decrease 6.22% in 2007.
•
In the 4th quarter, the indices fall down due to the impact of US sub prime crisis as well as the concern that the market has gone irrational and the bubble is about to break
GTSM INDEX and Trading Volume
Volume-Weighted Index
Turnover ( TWD$ 100 million)
26
Source :TSEC , GTSM NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - COMPARISON BETWEEN EXCHANGE AND OTC MARKET P/E Ratio
Turnover Ratio
45.00 40.00
500.00
35.00 30.00
400.00
25.00 20.00
300.00 200.00
15.00
100.00
10.00
0.00
5.00
2003
2004
2005
2006
2007
0.00 2003
2004 STOCK ON TSEC
2005 STOCK ON GTSM
2006
2007
STOCK ON TSEC
STOCK ON GTSM
EMERGING STOCK ON GTSM
EMERGING STOCK ON GTSM
Average Earning Per Share
Average Market Value Per Share 45.00
3.00
40.00
2.50
35.00
2.00
30.00 25.00
1.50
20.00
1.00
15.00
0.50
10.00 5.00
0.00 2003
2004 STOCK ON TSEC
2005 STOCK ON GTSM
2006
2007
0.00 2003
2004
2005
2006
2007
EMERGING STOCK ON GTSM
STOCK ON TSEC
STOCK ON GTSM
EMERGING STOCK ON GTSM
•
Emerging Stock on GTSM owns the highest P/E Ratio, but decrease dramatically from 2006 to 2007.
•
Stock on GTSM owns much higher turnover rate than the others.
•
Stock on TSEC owns the highest Average Earning Per Share and Average Market Value Per Share. 27
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
28
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - Overview
The turnover in the bond market in 2007 reached NT$193,644.6 bi l l ion (convertible bonds and corporate bonds with warrant excluded)
NT$93,178.7 bi l l ion involved out right trades, accounting for 48.12% of total turnover and representing a decrease of 45.04% as compared to 2006
Government bonds still represented a lion’s share in outright trade, accounting for as much as 98.74% of all outright trades, followed by corporate bonds with 0.41%, financial debentures with 0.15%, beneficiary securities with 0.17%, strip bonds with 0.07%, and foreign bonds with 0.46%.
The turnover of RP/RS trades totaled NT$99,857.9 billion in 2007, representing a decrease of 5.49% from NT$105,663.9 billion in 2006.
Since 2003, practically all outright trades of government bonds went through the GTSM electronic bond trading system (EBTS). In 2007, the amount of outright trade that went through EBTS reached NT$88,596.5 billion, accounting for 95.08% of outright trades in the market,
29
Source :Chinabond 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - OVERVIEW Unit:NT$ Billion
GTSM Market
250,000 200,000 150,000 100,000 50,000 2003
2004
2005 2006 Trading Value Outstanding
2007
•
Trading Value started to decrease from 2005, with -16.03% and -24.47% growth rate in 2006 and 2007 respectively.
•
Outstanding has kept growing slightly from 2003 to 2007.
•
At the end of 2007: •
bond trading volume reaches 133,382 billion
•
bond outstanding is 5,612 billion TWD 30
Source :FSC, Securities and Futures Bureau , 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - BOND ISSUE BY Product (GTSM)
2007
Government Bond Financial Debenture
2006
Beneficiary Securities Straight Corporate Bond
2005
Corporate Bond with Warranty Convertible&Exchangable Corporate Bond
2004
Foreign Bond International Bond
2003
Amount outstanding 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
•
Government Bonds and Corporate Bonds dominate the market, despite their volatility from year to year. They occupy around 80% of the volume
•
Financial debenture and Beneficiary certificate are the two main sector that keep growing for these 5 year. Especially for Beneficiary certificate
31
Source :Chinabond 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
32
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
DEVELOPMENT ISSUES - FUTURE PROSPECT
Updating of financial regulations -Drafted bills under review in the Legislative Yuan
Efforts to create a secure and efficient financial environment - Stronger credit risk control - Implementation of the Basel Capital II Accord - Outlook for Taiwanese banks (competitiveness) - Securities firms to act as depository and manage client funds - Integration of securities and futures self-regulatory organizations - Continued development of the Taiwan ETF market - Strengthening the solvency of insurance companies - Amending the insurance product review system - Continued review of the Taiwan Residential Earthquake Insurance system - Financial institutions urged to implement a loan pricing policy - Enhancing the preventive function of financial examinations
Internationalization of the financial industry - Pushing for internationalization of Taiwan's capital market - Promoting corporate governance - International cooperation Financial literacy initiatives 33
Source :FSC Annual Report 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN TAIWAN
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
2
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
TAIWAN AT A GLANCE
Territory - 31,688 km2 Population - 22.95 million Capital - Taipei Government System - Democracy Administrative Divisions - 2 municipalities / 16 counties / 5 provincial cities Currency - TWD, semi-flexible exchange rate, 1 EUR = 47.865TWD (2008.05.23) Languages - Mandarin, Taiwanese Ethnicities - Han (92%) and Taiwanese aborigines (2%) Religion Buddhism, Islam, Taoism, Christianity
3
Source : China Statistical Yearbook, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
TAIWAN AT A GLANCE - ECONOMIC DEVELOPMENT Taiwan GDP 2000 - 2008 USD Million
GDP (million US)
350,000
Taiwan is the 21th largest economy in the world (2006*)
Considering the GDP per capita, Taiwan is the 36th in the world in 2006 ( at $USD 16,274 )
Taiwan’s 2007 GDP amounted to $USD 383,303 million, along with a consistent growth since 2002. The CAGR of Nominal GDP in 2000-2007 is ??? %
Taiwan’s growth has consistently (except 2001) been higher than CPI inflation, indicating a positive real growth
Economic Outlook for 2008:
GDP Growth Rate
450,000 400,000
% 7.00
413,164 6.15
5.77 321,230 291,694
300,000
365,503
355,958 4.64 297,668
6.00
383,303 5.70
5.00
4.89
331,007 305,624
4.32
4.16
4.00
3.50 3.00
250,000
2.00 200,000
1.00
150,000
0.00
100,000
-1.00
50,000
-2.00
-2.17
0
-3.00 2000
2002
5.77
2006
2007
2008 E
4.32 3.86
4.16
0.00
2000
-0.01 -0.20 -0.28 2001 2002 2003 2004
Taiwan’s export is anticipated to mildly
1.80
1.61
1.25
0.60 2005
2006
increase. With the improving domestic 2007
2008E*
2008 05 21 – SRI in APAC Emerging Markets
sector contribution, real GDP is predicted to grow by 4.32% in 2008.
-2.17
-3.00
Source :DGBAS, NPV analysis
shows that the growth of global economy may be moderately slow in 2008.
2.31
2.00
The latest world economic projection
5.70 4.89
3.50
3.00
-2.00
2005
4.64
4.00
-1.00
2004
6.15
5.00
1.00
2003
GDP Growth rate and CPI¹ 2000-2008
7.00 6.00
2001
4
*: until 2008/ April MATERIALE NPV – RIPRODUZIONE VIETATA
INDEX
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
5
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - HISTORY
Over the second half of the 20th century, Taiwan has transformed itself from a predominantly agrarian economy into a vigorous industrialized economy, a process that may be summarized in three main phases:
Taiwan’s economy transform has gone through three phases of development:
Phase 1: 1949 to 1980 Shift from Agriculture to Manufacturing
Phase 2: 1981 to 1999 Ongoing Industrial Development
Phase 3: from 2000 onwards Reform for Sustainable Development
In 1949, the Central Bank relocated with the government from Mainland China to Taipei . A highly successful land reform program launched Commonly, bonds issued by the government as compensation for the agricultural lands confiscated and redistributed were utilized by the former landlords as collateral to secure loans with which they started up manufacturing and other businesses.
Beginning in the 1980s, the government implemented a series of measures to liberalize and internationalize the economy and privatize state-run enterprises. Labor-intensive industries, once the mainstay of Taiwan's economy, gave way to technology- and capital-intensive industries.
Globalization, trade liberalization, and the rise of neighboring China as an economic power pose new challenges for Taiwan's economic development in the new century. To meet them, the government has taken measures to upgrade Taiwan's industries, implemented financial reforms to foster a more attractive investment environment.
6
Source :Taiwan Yearbook 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - RECENT DEVELOPMENT
2 phase financial reforms have been conducted from 2000 :
Background
Taiwan opened its market for new banks in the early 1990s. As a result, 16 new banks were established and left behind an “over-banking” problem. More specifically, while market competition stimulated the development of the financial markets, the overly competitive banking market deteriorated banks’ asset quality, narrowed their interest spread and reduced profit margin from them.
For example, the market share of the top 5 banks in Taiwan only accounts for 38%, while the figures in Korea and Hong Kong are 87% and 76% respectively. In other words, Chinese Taipei lacked big and good banks.
Over-regulation was another problem in our financial market. Previously, banks were considered as policy tools aiming to support our manufacturing industry. This situation inevitably restricted the effectiveness of market mechanism and limited the competitiveness of our financial markets. PhaseⅠof Financial Reform (started in 2000)
The goal of the first reform aimed at resolving the non-performing loan problems.
For the purpose, the previous financial regulator, the Ministry of Finance (MoF), lowered business tax of financial institutions from 5% to 2% and the Central Bank lowered deposit reserves to encourage bad debt write-offs.
The Ministry of Finance established the Financial Restructuring Fund (or RTC fund) and created Asset Management Companies to deal with distressed financial institutions and resolve their deteriorated assets.
Source :Financial Supervisory Commission , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets
7
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - RECENT DEVELOPMENT
The MoF enacted the Financial Institution Merger Act and the Financial Holding Company Act to create a better M&A legal environment and lessen the adverse effect of over-banking.
The results of the first reform are significant. The average NPL ratio of domestic banks reduced from 11.27% in 2001 to 2.39% in June 2006.
In addition, 14 financial holding companies have been established since 2001. However, since there are only few M&A deals in recent years, the number of our banks is still large.
To promote integrated financial supervision, we have also enacted a law aiming at the integration of several supervisory agencies. The Financial Supervisory Commission was established on July 1, 2004 to consolidate the supervision of banking, securities and insurance sectors, and to act as a single regulator under the Executive Yuan. PhaseⅡof Financial Reform (started in 2004 till now)
The key objective of phaseⅡfinancial reform is consolidation and promoting Taiwan as a regional fund-raising and asset management center.
The four goals of market consolidation are: (1) three banks with market share over 10% by the end of 2005; (2) halving the number of state-owned banks by the end of 2005; (3) reducing FHCs (4)financial institutions with foreign investment.
To speed up financial M&As, the FSC has been trying to create an environment beneficial for consolidation, not only for domestic financial institutions but also for foreign investors.
It revises outdated regulations to be in line with international norms, implements differentiated supervisory measures to encourage well-performing financial institutions, and offers incentives for consolidation. . 8
Source :Financial Supervisory Commission , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW - BREAKDOWN OF FINANCIAL SERVICE INDUSTRY % Of Total Nominal GDP 10.04
2007
9.98
2006
10.43
2005
10.52
2004
10.56
2003 0%
20% Financing
40% Insurance
60%
80%
100%
Securities and Futures
•
Financial Service Industry accounts for around 10% of total GDP.
•
Financing, Insurance, and Securities and futures represents 65.7%, 24.6% and 9.7% of total financial market.
•
Financing has been decreasing gradually from 2003-2007 9
Source :CSRC, CBRC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW GDP & Capitalization (2002-2007) NTD (billion)
25000
180.00% 160.00%
20000
140.00% 120.00%
15000
100.00% 80.00%
10000
60.00% 40.00%
5000
20.00% 0
0.00%
2002
2003 GDP
2004
Market Capitalization
2005
2006
2007
Stock Market Capitalization To GDP Ratio
•
Market Capitalization start to surpass GDP from 2003
•
Market Capitalization is growing faster than GDP
•
Stock Market Capitalization to GDP Ratio keeps growing from 2002 (89.22%) to 2007 (171%)
Source :Taiwan Stock Exchange , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets
10
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN TAIWAN
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
11
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
- STRUCTURE 1/5 BANKING SECTOR
Executive Yuan
Financial Supervisory Commission ( Regulator )
Central Bank of R.O.C (Taiwan)
Banking Bureau Domestic Banks
Local Branches of Foreign Banks
Securities and Futures Bureau Insurance Bureau Financial Examination Bureau
Credit Cooperatives
Taiwan Post Co.
Supportive Departments : - International Affairs Departments - Legal Affairs Department - General Planning Department - IT Department - Secretary Office
Credit Departments of Farmers’ & Fishermen’s Associations
12
Source :FSC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - STRUCTURE 2/5 Central Bank - Central Bank of the Republic of China (Taiwan)
In December 1949, the Bank relocated with the government from Mainland China to Taipei
In November, 1979, the newly revised Central Bank of China Act was promulgated. While the Bank has since been under the Executive Yuan (Cabinet), its independent role in making monetary policy has not been changed.
the Bank's operational objectives include promoting financial stability, ensuring sound banking operations, maintaining the stable internal and external value of the currency and, within the scope of the above three objectives, fostering economic development.
The main functions of CBC:
Monetary Management
Foreign Exchange Management
Clearing and Settlement Service
Currency Issuance
Treasury Agency Functions
Bank Examination
Statistics and Research
Participation in International Organizations ;
13
Source :CBC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - STRUCTURE 3/5 Regulator: Taiwan Financial Supervisory Commission
Financial Supervisory Commission (FSC) was inaugurated and commenced operation since 1 July 2004 .
FSC functions act as a single and independent regulator that directly reports to the Executive Yuan.
Main goal : consolidate the supervision of banking, securities and insurance industries under one roof, as well as to integrate the tasks of examining these industries.
The FSC includes 4 bureaus and 5 supporting departments.
4 bureaus - The Bureau of Monetary Affairs - The Securities and Futures Bureau
}
responsible for the supervision of financial institutions.
- The Insurance Bureau - The Examination Bureau is in charge of the examination of all financial institutions.
It is worth mentioning that the newly organized Examination Bureau integrates examination staff from the CBC*, BOMA** and the CDIC***, which provides better administrative and human resources to conduct financial examination under one agency.
5 supporting departments - International Affairs Departments - Legal Affairs Department - General Planning Department - IT Department - Secretary Office
* CBC : Central Bank of Republic of China (Taiwan) ** BOMA : Bureau of Monetary Affairs *** CDIC : Central Deposit Insurance Corporation
2008 05 21 – SRI in APAC Emerging Markets
14
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - BANKING ASSETS AND LIABILITIES
billion TWD
45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 2003
2004
2005
2006
2007
•
As of the year-end 2007, the total assets of the banking sector amounted to TWD 38235 billion, an increase of RMB 501 billion from 2006.
•
During the same period, the total liabilities reached TWD 36069 billion, an increase of TWD 433 billion. 15
Source :CBRC 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - FINANCIAL INSTITUTIONS ASSETS BREAKDOWN
2007
Domestic Bank Local branch of foreign banks
2006
Credit Cooperatives Bills Finance Companies
2005
Trust and Investment companies Credit Departments of Farmers' Associations
2004
Credit Departments of Fishermen's Associations The Postal Savings System
2003
0%
20%
40%
60%
80%
100%
•
Domestic banks occupy the majority of total asset and account for 72.8% of total.
•
Local branch of foreign banks keep increasing
•
Credit Cooperatives, Bills Finance Companies and Trust and Investment company are decreasing gradually.
•
Credit Departments of Farmers' and Fishermen’s Associations have no significant change 16
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - DEPOSITS AND LOANS billion NTD
30 000
73.0%
25 000
72.0% 71.0%
20 000
70.0%
15 000
69.0%
10 000
68.0%
5 000
67.0%
0
66.0% 2003
2004 Deposit
2005 Loan
2006
2007
Loan to Deposit Ratio
•
As of the year-end 2007, total deposits and total loans outstanding amount to 25245 and 18019 billion, respectively
•
Loan to Deposit Ratio keeps at about 70% in the latest 4 years 17
Source :FSC, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - NPLs1 OF DOMESTIC BANKS Billion TWD
900
6.00%
800
5.00%
700 600
4.00%
500
3.00%
400 300
2.00%
200
1.00%
100 0
0.00% 2003
2004
2005 Total NPL
2006
2007
NPL Ratio
•
The quality of assets improved dramatically due the Financial Reform from 2000.
•
By the end of 2007, the NPLs of major commercial banks totals TWD 337.4 billion, a decline of TWD 38 billion from end-2006. The NPL ratio was 1.79 percent, with a decrease of 0.8% 18
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
Note 1: Non-Performing Loans MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR - ROA and ROE of Domestic Bank 12 10 8 6 4 2 0 -2
2003
2004
2005 ROA
2006
2007
ROE
•
ROE reduced dramatically from 10.3% (2005) to -0.43% (2006)
•
ROA and ROE decrease from 2005 due to Double-card debt crisis (credit card / cash card ) and over competition.
19
Source :FSC , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
Note 1: Non-Performing Loans MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
20
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
- STRUCTURE 1/5 Stock Market
Financial market
Taiwan Stock Exchange / TSEC
GreTai Security Market / GTSM
(exchange market)
(OTC market)
Stock
Stock
TDR (Taiwan Depository Receipts)
Emerging Stock
Warrant
Bond
Bond
Derivative
Beneficiary Certificates ETF Beneficiary Securities
21
Source :TSEC, GTSM , NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - REGULATOR ( Exchange Market ) Taiwan Stock Exchange / TSEC
The CSRC was founded in 1992. It is an institution of the State Council of the People's Republic of China (PRC). It is the main security (finance) regulator that responsible for conducting supervision and regulation of the securities markets in accordance with the law
In August 1997, The State Council decided to put the securities markets in Shanghai and Shenzhen under the supervision of the CSRC
In November 1998, Organizations engaged in securities formerly supervised by the People's Bank of China were put under the centralized supervision of the CSRC
Product and Service Stock / TDR (Taiwan Depository Receipts) / Warrant / Bond /Beneficiary Certificates / ETF/ Beneficiary Security
Its responsibilities include:
Formulating policies, laws and regulations concerning markets in securities and futures contracts;
Overseeing issuing, trading, custody and settlement of equity shares, bonds, investment funds;
Supervising listing, trading and settlement of futures contracts;
Supervising futures exchanges; securities and futures firms;
Granting the qualification of law firms, accounting firms, asset appraisal firms, and professionals in these firms 22
Source :CSRC 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - REGULATOR ( OTC Market ) GreTai Security Market / GTSM
The government reopened the over-the-counter trading of bonds in October 1982.
The Taipei Securities Dealer's Association (TSDA) started handling over-the-counter trading of stocks in February 1988.
In 1994, this non-profit organization with the mission to develop the over-the-counter market was named Gre Tai Securities Market (the GTSM)
Since its inception in 1994, GreTai Securities Market (GTSM) has been endeavoring to play the role of a family and aspires to be the "protagonist of economic vitality and the cradle of successful businesses" to help businesses grow and develop, drive the upgrade of industries and enhance competitiveness in the international markets.
Product and Service Stock / Emerging Stock / Bond / Financial Derivative
23
Source :GTSM, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - OVERVIEW billion TWD
40000 35000 30000 25000 20000 15000 10000 5000 0 2003
2004 Capital Issued
2005 Market Capitalization
2006 Trading Value
2007
•
From 2003-2007, Taiwan stock exchange market has grown consistently and stably.
•
In 2007, the market capitalization reaches 21,527 billion TWD and growth rate is 11.1% from 2006.
•
In 2007, the Trading Value reaches 33,527 billion TWD and growth rate is 38.6% from 2006
•
In 2007, the Capital Issued reaches 5601 billion TWD and growth rate is 1.4% from 2006 24
Source :FSC Financial Outlook Monthly, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - COMPARISON BETWEEN EXCHANGE AND OTC MARKET Number of Listing
Market Capitalization TWD (Billion)
800
25000
700 600
20000
500
15000
400 300
10000
200 100
5000
0 2003
2004
2005 GTSM
2006
2007
0 2003
TSEC
2005
GTSM
Trading Value
TWD (Billion)
2004
2006
2007
TSEC
Trading Volume TWD (Billion)
40000
120000
35000 30000
100000
25000
80000
20000
60000
15000
40000
10000
20000
5000 0
0 2003
2004
2005 GTSM
2006
2007
TSEC
2003
2004
2005 GTSM
2006
2007
TSEC
•
TSEC and GTSM occupy 91.89% and 8.11 % of the Market Capitalization respectively in 2007.
•
TSEC and GTSM occupy 85.56% and 14.44 % of the Market Capitalization respectively in 2007
•
TSEC and GTSM occupy 85.80% and 14.20 % of the Market Capitalization respectively in 2007. 25
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - MARKET PERFORMANCE 2007 TAIEX and Trading Volume
•
In the first 3 quarters of 2007, both TAIEX and GTSM Index keeps the growth momentum in the previous year
•
TAIEX opened at 7920 and closed at 8509.56, with a rate of yearly increase 7.39% in 2007.
•
GTSM Index opened at 164.71 and closed at 154.47, with a rate of yearly decrease 6.22% in 2007.
•
In the 4th quarter, the indices fall down due to the impact of US sub prime crisis as well as the concern that the market has gone irrational and the bubble is about to break
GTSM INDEX and Trading Volume
Volume-Weighted Index
Turnover ( TWD$ 100 million)
26
Source :TSEC , GTSM NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET - COMPARISON BETWEEN EXCHANGE AND OTC MARKET P/E Ratio
Turnover Ratio
45.00 40.00
500.00
35.00 30.00
400.00
25.00 20.00
300.00 200.00
15.00
100.00
10.00
0.00
5.00
2003
2004
2005
2006
2007
0.00 2003
2004 STOCK ON TSEC
2005 STOCK ON GTSM
2006
2007
STOCK ON TSEC
STOCK ON GTSM
EMERGING STOCK ON GTSM
EMERGING STOCK ON GTSM
Average Earning Per Share
Average Market Value Per Share 45.00
3.00
40.00
2.50
35.00
2.00
30.00 25.00
1.50
20.00
1.00
15.00
0.50
10.00 5.00
0.00 2003
2004 STOCK ON TSEC
2005 STOCK ON GTSM
2006
2007
0.00 2003
2004
2005
2006
2007
EMERGING STOCK ON GTSM
STOCK ON TSEC
STOCK ON GTSM
EMERGING STOCK ON GTSM
•
Emerging Stock on GTSM owns the highest P/E Ratio, but decrease dramatically from 2006 to 2007.
•
Stock on GTSM owns much higher turnover rate than the others.
•
Stock on TSEC owns the highest Average Earning Per Share and Average Market Value Per Share. 27
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
28
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - Overview
The turnover in the bond market in 2007 reached NT$193,644.6 bi l l ion (convertible bonds and corporate bonds with warrant excluded)
NT$93,178.7 bi l l ion involved out right trades, accounting for 48.12% of total turnover and representing a decrease of 45.04% as compared to 2006
Government bonds still represented a lion’s share in outright trade, accounting for as much as 98.74% of all outright trades, followed by corporate bonds with 0.41%, financial debentures with 0.15%, beneficiary securities with 0.17%, strip bonds with 0.07%, and foreign bonds with 0.46%.
The turnover of RP/RS trades totaled NT$99,857.9 billion in 2007, representing a decrease of 5.49% from NT$105,663.9 billion in 2006.
Since 2003, practically all outright trades of government bonds went through the GTSM electronic bond trading system (EBTS). In 2007, the amount of outright trade that went through EBTS reached NT$88,596.5 billion, accounting for 95.08% of outright trades in the market,
29
Source :Chinabond 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - OVERVIEW Unit:NT$ Billion
GTSM Market
250,000 200,000 150,000 100,000 50,000 2003
2004
2005 2006 Trading Value Outstanding
2007
•
Trading Value started to decrease from 2005, with -16.03% and -24.47% growth rate in 2006 and 2007 respectively.
•
Outstanding has kept growing slightly from 2003 to 2007.
•
At the end of 2007: •
bond trading volume reaches 133,382 billion
•
bond outstanding is 5,612 billion TWD 30
Source :FSC, Securities and Futures Bureau , 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET - BOND ISSUE BY Product (GTSM)
2007
Government Bond Financial Debenture
2006
Beneficiary Securities Straight Corporate Bond
2005
Corporate Bond with Warranty Convertible&Exchangable Corporate Bond
2004
Foreign Bond International Bond
2003
Amount outstanding 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
•
Government Bonds and Corporate Bonds dominate the market, despite their volatility from year to year. They occupy around 80% of the volume
•
Financial debenture and Beneficiary certificate are the two main sector that keep growing for these 5 year. Especially for Beneficiary certificate
31
Source :Chinabond 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN CHINA
Taiwan at a glance
Financial market overview
Banking sector
Stock market
Bond market
Development issues
32
2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
DEVELOPMENT ISSUES - FUTURE PROSPECT
Updating of financial regulations -Drafted bills under review in the Legislative Yuan
Efforts to create a secure and efficient financial environment - Stronger credit risk control - Implementation of the Basel Capital II Accord - Outlook for Taiwanese banks (competitiveness) - Securities firms to act as depository and manage client funds - Integration of securities and futures self-regulatory organizations - Continued development of the Taiwan ETF market - Strengthening the solvency of insurance companies - Amending the insurance product review system - Continued review of the Taiwan Residential Earthquake Insurance system - Financial institutions urged to implement a loan pricing policy - Enhancing the preventive function of financial examinations
Internationalization of the financial industry - Pushing for internationalization of Taiwan's capital market - Promoting corporate governance - International cooperation Financial literacy initiatives 33
Source :FSC Annual Report 2007, NPV analysis 2008 05 21 – SRI in APAC Emerging Markets
MATERIALE NPV – RIPRODUZIONE VIETATA
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