The Taiwan Monthly

Mar. 2021

Market & ETP Overview

Future work plans of the TWSE

Taiwan stock market has reached a historical high

The TWSE Capitalization Weighted Stock Index closed at 14,732.53 points as of the end of 2020, an increase of 22.8% from the end of 2019. The market capitalization of listed companies reached NT$44.9 trillion, and the total trading value for the year was NT$49.2 trillion, with the average daily trading value exceeding NT$200 billion for the first time.

Table: Overview of Taiwan Stock Exchange Market

  • The implementation of two important trading rules have achieved remarkable results
    Since the implementation of continuous trading system last March, the trading efficiency has been greatly improved, the number of placing orders increased by nearly 50%, and the trading value and the amount of shares traded have increased by more than 80%, which has greatly contributed to the increase of the price and volume of Taiwan's stock market. The intraday odd lot trading launched on October 26, 2020 has become significantly more active than after-hours trading. The trading value is more than three times as that in the past. The number of trading accounts have also increased from 218,000 to 616,000. Especially, the age group of 21 to 30-year-old increased the most significantly, indicating the new measure is welcomed among young people.
  • Listed companies demonstrated a high degree of resilience
    Last year's revenue of listed companies maintained at the level of NT$33 trillion. Additionally, the pre-tax net income in the first three quarters grew by 8.1% against the trend.
  • Younger and sharply increased number of investors
    Last year, the number of new accounts opened reached 670,000, contributing to the growth of the total number of stock accounts to 11.24 million, accounting for 47.3% of the total population. In terms of the age of investors, the proportion of people with stock accounts in all age groups has generally increased. Particularly, in the 20- 30-year-old age group, the proportion has rapidly grown from 25.4% five years ago to 36.1%, with a substantial increase to 1.23 million people.
  • Stocks held by foreign investors continued to increase
    Taiwan was highly recognized in the 2020 CG watch rankings by the Asian Corporate Governance Association (ACGA) last year as it ranked 4th among 12 Asian countries, the best achievement over the years. Meanwhile, Taiwan has maintained among the top in the three major ESG indices in the world. Subject to the implementation of the continuous trading system last year, Taiwan's stock market has been fully aligned with the international standard, attracting more foreign investment. The percentage of market value held by foreign investors has increased from 16.3% in 2000 to 45% year by year.

Future Work Plans

Generally, major global economic forecasting agencies are mostly optimistic about the economy of 2021. However, the continuous escalation of COVID-19 still poses a daunting challenge to the global capital market. To cope with future unexpected changes and risks, the TWSE will keep working harder to improve the foundation of Taiwan’s capital market.

  • Build a complete initial public offering mechanism
    The TWSE plans to launch the Taiwan Innovation Board (TIB) in the third quarter of 2021.With the adapting the market capitalization as the core listing standards, the TIB is with more potential to satisfy the needs of business operation. By constructing a more comprehensive listing mechanism, Taiwan’s capital market is expected to play a key role in supporting business growth.
  • Implement a market-making mechanism to raise the trading liquidity
    This year, the TWSE will introduce a stock market maker mechanism for potential high-quality and low-liquidity stocks. At present, many securities firms have expressed their willingness to participate as a market maker. Via the plan of launching at the end of June, it is expected that trading will be more active.
  • Advance supervision of listed companies
    The Financial Supervisory Commission (FSC) released the “Corporate Governance 3.0—Sustainable Development Blueprint” last August as a policy guideline for the implementation of corporate governance in the next three years. The TWSE will proactively cooperate with the implementation via enhancing corporate governance, increasing supervision intensity, and strengthening the functions of underwriters and certified public accountants (CPAs). To better utilize digital technology for supervision, it will also adopt artificial intelligence, big data, and other technologies to extensively collect information, analyze abnormal trading patterns and signs, establish early warning indicators, and integrate the strength of intermediary agencies, such as CPAs and underwriters, to enhance the supervision efficiency.
  • Strengthen information security
    The establishment of a safe and efficient trading system has always been TWSE's core business. The TWSE has been able to maintain the normal operations of the system for a long time and eliminate unexpected issues in a timely manner. The introduce of the continuous trading system has created a great increase of the number of transactions together brought up a more diversified trading patterns and heavier load for the information system. In the future, the TWSE will continue to expand capacity, adjust the system load to the best condition, and work together with associated securities institutions to establish a computer information security incident response team so as to enhance the resilience of information security protection in an all-round manner.
  • Strengthen investor education
    As the current percentage of electronic orders placed is over 70%, and there are many young investors and new joiners in the stock market. The TWSE will open more digital learning classes additionally to the existing physical ones, incorporate digital animation and videos, and include diverse online learning resources, such as online activities, as a supplement, to attract investors' attention and achieve the best educational effect.

Source: Taiwan Stock Exchange website.

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