September 15, 2023
Taiwan announces foreign institutional investors may use Taiwan-listed stocks as collateral for offshore investment activities
To attract foreign investment in the Taiwan stock market, the Financial Supervisory Commission (FSC) announced that foreign institutional investors (FINIs) may use Taiwan-listed stocks as collateral for offshore investment activities starting from 28 August 2023.
Before implementation of this new measure, FINIs can only use domestic securities as collateral to acquire New Taiwan Dollar (NTD) funds from the below parties for specific purposes:
Under the new measure, FINIs may also use Taiwan-listed stocks as collateral for offshore investment activities from 28 August 2023.
For this new measure to apply, both foreign investors engaged in offshore investment activities must be qualified and registered FINIs in Taiwan. The offshore investment activities include offshore securities lending, derivatives trading, and foreign currency borrowing. Further, the funds obtained by the collateral provider must be used offshore in foreign currency and may not involve any onshore activity in Taiwan.
This new measure is pursuant to Item 3 of Article 21 of the "Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals" and "Operational Guidelines for Overseas Chinese and Foreign Nationals Using Domestic Securities as Collateral for Offshore investment Activities." From the implementation date, FINIs may use TWSE-listed or OTC stocks that are qualified for margin purchases or short sales as collateral to obtain funds for their offshore investment activities without selling their Taiwan stock holdings.
It is anticipated that the new measure will help FINIs increase the flexibility of foreign-capital utilization and willingness to hold stock investments in Taiwan, while also reducing the need for FINIs to sell domestic stock to obtain funds, contributing to the liquidity of the financial market and strengthening the stability of the securities trading market in Taiwan.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Taiwan), Taipei
Ernst & Young LLP (United States), Taiwan Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor