Taiwan-issued ECBs shrank sharply to US$6.8 B. in 2004

Jan 26, 2005 Ι Industry In-Focus Ι Furniture Ι By Judy, CENS
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Taipei, Jan. 26, 2005 (CENS)--Affected by some corporate scandals that broke out in Taiwan in the past two years, overseas exchangeable corporate bonds (ECBs) issued in 2004 by Taiwanese enterprises shrank by US$3.827 billion (more than NT$100 billion) from 2003's US$10.627 billion to US$6.8 billion, according to the statistics compiled by securities brokerage firms.

Insiders attributed the sharp fall to Financial Supervisory Commission (FSC) discouraging issuance of such ECBs by Taiwanese enterprises maintaining overseas operations. As a result, overseas Taiwanese enterprises have moved to float such bonds in Hong Kong. They believed that the considerable drop of ECBs issued through financial institutions here has seriously undermined the competitiveness of Taiwan's capital market.

Some underwriters, citing reports released by some foreign investment banks here, noted that the value of ECBs issued in 2004 shrank by US$10 billion and the number of underwriters of ECBs decreased to 56 from 126 registered a year earlier.

Some ECB underwriters analyzed that the notorious scandal of Procomp Informatics, a professional manufacturer of gallium arsenide (GaAs) products on the island, forced FSC to strictly screen the issuers of ECBs and allow only 40% of the funds raised by domestic enterprises through ECBs to be invested in mainland China. Accordingly, many domestic enterprises that have operations there have to resort to overseas financial markets, mainly in Hong Kong, to raise capitals for their operations in the mainland.
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