The Taiwan Monthly

Market & ETP Overview

Taiwan capital market has made great progress in 2020

Last year, COVID-19 greatly affected the world. With the success of the pandemic prevention in Taiwan, listed companies have demonstrated their perseverance and resilience, and the overall economic growth reached 2.54%. In light of the accomplishments, Taiwan has won the honor to be one of the few growing economies in 2020 by the Economist. Based on a solid economic foundation, the Taiwan stock market has made a number of historical achievements.

Taiwan stocks have made historical achievements

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. With high stock market liquidity, the profits of securities firms jumped to NT$49.8 billion in the first 11 months of 2020, and securities transaction taxes reached NT$130.8 billion (estimated to be around NT$147 billion for the entire year), enabling the public to share the economic prosperity.

Table 1. Overview of Taiwan Stock Exchange Market

The implementation of two important trading rules have achieved remarkable results

A continuous trading system that had been studied and discussed for nearly 10 years was still implemented as planned despite the impact of pandemic. Fortunately, it was successfully launched on March 23, 2020 and operated stably with adequate preparation and comprehensive supporting measures. Since the implementation, the trading efficiency has been greatly improved, the number of 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.

Since the implementation of intraday odd lot trading on October 26, 2020, it has become significantly more active than after-hours trading. The trading value is more than three times as much as in the past, and the number of trading accounts have also increased from 218,000 to 616,000-- age group of 21-30-year-old increased the most significantly by 3.1-fold, indicating the new measure is welcomed among young people. The majority of the investment in stocks was concentrated on high-priced and financial stocks, which also led to a sharp increase in the number of shareholders for each company in this regard.

Listed companies demonstrated a high degree of resilience

Listed companies have demonstrated their perseverance and actively adjusted production capacity and sales channels to turn pandemic crisis into business opportunities. Therefore, last year's revenue is expected to be maintained at the level of NT$32 trillion or above (NT$29.7 trillion for the first 11 months). Additionally, the pre-tax net income in the first three quarters grew by 8.1% against the trend, of which domestic listed companies grew by 8.5%, while foreign listed companies were obviously affected and declined by 5.6%.

Table 2. Profitability of Listed Companies

Younger and sharply increased number of investors

The outstanding performance of the capital market has attracted investors to participate more actively. Last year, the number of new accounts opened reached 670,000, contributed the total number of stock accounts to 11.24 million, accounting for 47.3% of the total population. It indicated one out of every two Taiwanese citizens engaged in stock market investment on average, bringing the number of stock investors to a record high of 4.38 million. In terms of the age of investors, of people with a stock account in all age groups has generally increased in proportion. Particularly, in the 20- 30-year-old 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 hit a record high

The high yield and excellent performance of the corporate governance of Taiwan’s listed companies are the main reasons to attract foreign investment. 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.

 

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.

Source: Taiwan Stock Exchange website. https://www.twse.com.tw/en/news/newsDetail/ff8080817698e3d40176d1da12bc0079

For further information, please contact Ms. Kao at 1090@twse.com.tw.