Investors vital for capital market: FSC
Once big investors move their money from Taiwan and become familiar with capital markets overseas, they are less likely to remit money back again, said the Financial Supervisory Commission (FSC) chairman yesterday.
Chairman Tseng Ming-chung ( ) said it takes much time and effort to remit money abroad, and big investors prefer not to avoid the hassle of making the arrangements necessary to transfer the money back home.
They consider returning only when Taiwan stock prices drop lower in comparison with other markets, he said. Tseng made the comments while making an appearance at the 2015 Golden Service Awards ceremony held by CommonWealth Magazine ( ).
Tseng used data from the FSC to come to his conclusion. Trade volume of natural persons used to average NT$33 trillion, but the amount dropped to NT$25 trillion in 2012 after the introduction of the capital gains tax, before plunging further to NT$23 trillion in 2013.
The launch of stock day trading in 2014 helped boost turnover to NT$27 trillion, but it was still substantially lower than the peak volume of NT$44 trillion.
Natural persons’ share of trade fell from 80 to 59 percent, Tseng pointed out.
Foreign institutional investors’ turnover, on the other hand, has stayed between NT$9.9 and NT$10 trillion, while investment trusts’ trade has been maintained between NT$700 billion and NT$800 billion
Taiwan’s stock market requires the presence of large and medium investors, and what the FSC can do to help realize this is connect local stocks with the world and make the trading mechanism more transparent, Tseng said.
That is why the FSC launched the “ascension plan” ( ) on Feb. 3, which is a package of stock market stimulus measures.
FSC Proposes Cut to Futures Transaction Tax
In an attempt to further jump-start the capital market, the FSC proposed reducing the futures transactions tax yesterday.
In fact, the tax rate has been cut four times since the passage of the Futures Transaction Tax Act 1998. It was last reduced to 0.002 percent in April 2013.
The FSC claimed the adjustment had a positive impact, as the amount of trade grew from 153 million lots in 2013 to 202 million lots in 2014, representing a 32-percent growth.
However, the futures transaction tax has not been implemented in the U.S., Japan, Singapore, and Hong Kong’s futures markets, the FSC said, adding that major markets have teamed up for joint marketing efforts.
Taiwan lost competitiveness by levying the transaction tax, which also make it more difficult for Taiwan to form alliances with other markets, the FSC said.