[comprehensive report of the Observer Network] in order to counter the increasingly powerful A-shares, Taiwan, Japan, and South Korea stock exchanges chose to "stay warm together."
Taiwan, Japan and South Korea's capital markets "huddle together to keep warm" against A-shares
According to a report in Taiwan's Liberty Times on March 19, the Taiwan Stock Exchange signed a tripartite cooperation memorandum (MOU) with the Japan Stock Exchange Group and the Korea Stock Exchange last Thursday, through which it plans to issue an index fund (ETF) to attract international buyers to invest in the fund and further allow funds to flow into the three capital markets of Taiwan, Japan and South Korea. To counter the magnetic effect caused by the inclusion of mainland A shares in the MSCI (Mingsheng Index).
According to Taiwan media, the Taiwan Stock Exchange has previously signed cooperation memorandums or draft memorandums (MOC) with 30 exchanges, of which 43 memorandums or drafts have already entered into force, but the one jointly signed by Taiwan, Japan and South Korea is the most significant, and it is the first time that the three exchanges have jointly signed a memorandum of cooperation.
According to the director of the Taiwan Stock Exchange, the tripartite cooperation was proposed by Shi Junji, the current vice president of the "Executive Yuan". When he was chairman of the Taiwan Stock Exchange last year, he first jointly compiled an index with the Korean Stock Exchange. during his visit to Japan, he proposed to "jointly confront mainland A shares", which successfully courted the Japanese Securities and Exchange Group.
Taiwan, Japan, Taiwan and South Korea have cooperated frequently in recent years
In fact, the Taiwan Stock Exchange and the Korean Stock Exchange felt the pressure from A shares as early as 2015, when the two sides signed the second cooperation memorandum in history at the end of that year (the first one was signed in 2000, before the Korean exchange merged). In April 2016, the Taiwan Stock Exchange set up a "Taiwan-South Korea Capital Market Cooperation Group" to focus on index compilation.
In October 2016, Taiwan and South Korea simultaneously listed each other's index funds, but the trading was deserted and the market did not buy it.
In 2017, Taiwan and South Korea jointly compiled their first cross-border index, the Taiwan-South Korea Information Technology Index, which is expected to launch index funds in May and June this year. It is said that the index will include many components of the two places, such as Taiwan Semiconductor Manufacturing Co Ltd and Samsung Electronics, as well as steel and automobiles in addition to technology stocks.
Taiwan media said that the index has successfully outperformed Taiwan and South Korea in the past year, attracting the interest of many investors.
In addition to Taiwan and South Korea, the exchanges between Taiwan and Japan have also cooperated before.
The Taiwan Stock Exchange signed memorandums of cooperation with the Tokyo Stock Exchange and the Osaka Stock Exchange in 2000 and 2007 respectively. In September 2014, the Taiwan Stock Exchange established a "Taiwan-Japan Capital Market Cooperation Group". In September 2015, Japanese index funds were listed in Taiwan, and in July 2016, Taiwan's TAIEX index futures were listed on the Osaka Stock Exchange.
The A-share market is obviously hotter than that of Taiwan, Japan and South Korea.
According to statistics, by the end of 2017, the number of listed companies on the Taiwan Stock Exchange, the Korean Stock Exchange, the Japanese Stock Exchange and the Shanghai Stock Exchange was 907,2134, 3604 and 1396 respectively. Although the Shanghai Stock Exchange only ranks third among the four listed companies, the total market capitalization of listed companies is as high as US $5.09 trillion, second only to Japan's US $6.22 trillion and well ahead of South Korea's US $1.77 trillion and Taiwan's US $1.07 trillion. If all A shares are included in MSCI in the future, and measured by market capitalization, the proportion of Japan and South Korea will certainly be reduced.
Further, from the perspective of trading, the turnover of A-shares on the Shanghai Stock Exchange was as high as $7.56 trillion in 2017, higher than Japan's $5.81 trillion, compared with only $1.92 trillion and $770 billion in South Korea and Taiwan. In terms of turnover (total transaction value divided by the market capitalization of listed companies), A-shares on the Shanghai Stock Exchange are 161%, while Japan, South Korea and Taiwan are only 103%, 121% and 78%. This shows that the A-share market is much hotter than Japan, South Korea and Taiwan, which is the most direct reason for the cooperation among the three stock exchanges.