The Wall Street Journal has an interesting article on Taiwanese companies returning home to list on the Taiwan Stock Exchange. The WSJ writes:
Taiwan's new government is close to winning some important victories in its effort to revitalize the island's stock market, as several Taiwanese companies that had gone public overseas are now considering listing at home.
Ju Teng International Holdings Ltd., which makes notebook-computer casings and has been listed in Hong Kong since 2005, said its board will decide before the end of the month whether to make a public offering on the Taiwan Stock Exchange or to issue depositary receipts instead.
Other companies say they are considering a Taiwan listing, including Delta Networks Inc., an original design manufacturer of network-communications equipment that also trades in Hong Kong, and Ta Yang Group Holdings Ltd., which makes input devices such as keyboards and keypads for computers, mobile phones and autos.
Taiwan has set a goal of attracting 200 companies to the local exchange. "It is encouraging to see companies looking into the option of using Taiwan's stock exchange as a platform for capital-market operations," said Tao Dong, Credit Suisse's chief regional economist for Asia, who once predicted Taiwan's stock market would be marginalized in a few years.
The effort got a boost earlier this month. Taiwan's Hon Hai Precision Industry Co., the world's largest contract electronics maker by revenue and a maker of Apple Inc.'s iPods and other electronics, said it plans to list its overseas units on the Taiwan Stock Exchange. With the public listing of its Foxconn International Holdings Ltd. unit on Hong Kong three years ago, Hon Hai was one of the first Taiwan companies to turn to Hong Kong, where about 60 Taiwan companies are traded.
Warming relations with China have proved a potent lure home. Taiwan President Ma Ying-jeou, who took office in May, has eased investment restrictions that made it tricky for Taiwan-traded companies to keep significant operations in the mainland. That could help Taiwan's efforts to become a regional financial hub as it ties the island's fate closer to the mainland's.
The WSJ continues saying:
The performance of Taiwan's exchange has trailed behind that of others. Hong Kong's benchmark Hang Seng Index nearly doubled between 2005 and 2007, while the benchmark Shanghai Composite Index rose fourfold. Over the same period, Taiwan's benchmark Weighted Price Index rose about 39%. As of March, Taiwan's exchange had 712 listed companies, compared with Shanghai's 861 and Hong Kong's 1,244, according to recent research published by the Hong Kong Securities and Futures Commission.
Taipei's new policy raises the ceiling on China investment to 60% of corporate net worth. It also allows companies in which Chinese shareholders own 20% or more to list on Taiwan's exchange and abolishes a rule banning foreign companies from investing in China with locally raised funds.
Many of the Taiwanese companies exploring a domestic listing are frustrated with their stock-market valuations elsewhere. "Compared with our Taiwanese counterparts, our P/E in Hong Kong is really low," said Huang Cheng-pin, a Ju Teng spokesman. The company's P/E ratio has been about seven, while its Taiwanese counterparts have P/E ratios of about 15 on the local stock market, he said.
First up I will say its good for Taiwanese companies to list in Taiwan and that this may stimulate the local bourse and keep it competitive in the region. Taiwan has stated before they do want to become a financial hub and having more companies listed on the exchange may go a long way to helping the local stock exchange and the financial sector.
However, I find the comparison between the Hang Seng and the Shanghai stock exchange overly simplistic. The comparison is only made between 2005 to 2007 when most observers agreed the Chinese stock market was being fuelled mostly by speculation with share prices for some companies much higher than any potential future revenue. It just seems crazy to compare the two markets.
How about recent history? the Shanghai Index (SSE) has declined from 5261 in January to 2431 on 21 August. This is a 53% drop in value. On the other hand, the Taiwan Weighted Index (^TWII) has dropped from 8184 to 6918 yesterday. A drop of only 15% on the year. Both indicies may go down further but the point being made is that much of the four-fold increase in the Shanghai Stock market was speculative no substantive. The Hang Seng index is down from 27,560 to 20,392, which is a 26% decrease. On the year we should say the Taiwan index is doing better than the other two indicies, but then this would be a little too simplistic as well.
I also suspect there are also other forces driving the index movements. The underlying shares on the index are certainly very different in each case and the exposures they have will also vary significantly. The global context of the markets and the underlying forces for the predominant businesses represented in the indexes should be properly analyzed before people make superficial comparisons based on price.
What I did like to see was that the companies were being honest about why they want to come back to Taiwan. A higher P/E ratio is better for the share price (see Wikipedia page). However, the government has also for a while now been trying to attract Taiwanese companies back to Taiwan. We already noted this in Taiwanese Investment in China: Now and the Future. What might be good for the economy is that if the companies do list in Taiwan, they might be more prepared to put more of their operations on the island and thereby stimulate the job market.
Any investments back in Taiwan will be good for the economy and more listings on the exchange may help stimulate the financial sector in Taiwan too.
Wall Street Journal: Taiwanese Companies Consider Home Listing
No comments:
Post a Comment