The Taiwan Monthly

Market & ETP Overview

Taiwan capital market has made great progress in 2021

Continued outstanding performance in value/volume over three years

The Taiwan Capitalization Weighted Stock Index surpassed 18,000 points last year (2021), with the closing index on the final business day at 18,218, an increase of 23.7% over 2020. In fact, the last three years have all seen an annual growth of above 20%, with a three-year accumulative increase of 87.3%, outshining most other international markets. The combined market capitalization of all TWSE-listed stocks reached NT$56.3 trillion, making us the 16th largest market worldwide. With trading value reaching NT$95.5 trillion and average daily trading value nearing NT$400 billion; Taiwan’s standing has risen significantly to the 8th highest among global stock markets due to our high liquidity levels. Combined with the market capitalization of Taipei Exchange listed stocks, Taiwan’s total aggregate market capitalization reached NT$62.1 trillion, or approximately US$2.2 trillion, outperforming South Korea for the first time, with no signs of stopping.

Table 1. Overview of Taiwan’s centralized market

Shared prosperity for all via the market

TWSE-listed companies have recorded considerable profits in the past two years. In the first three quarters of 2021, aggregate net profit after tax exceeded NT$3 trillion, and is expected to surpass NT$4 trillion for the entire year. The three major government pension funds have reported gains of NT$418 billion for the first 11 months of the year, and profits exceeding NT$1.3 trillion over the last three years. Furthermore, NT$275.3 billion in securities transaction tax was reported for 2021, far exceeding the predicted amount by NT$155.3 billion, showing that the benefits of the securities market have been harvested by the general public to create common prosperity.

Table 2. Net profit after tax for listed companies and securities dealers, revenue from securities transaction tax, and earnings of the three major pension funds

Strong earnings from TWSE-listed companies

Despite the many pandemic-related disruptions over the last two years, TWSE-listed companies have continued to post outstanding revenues. Total revenues in 2021 reached NT$38.2 trillion, up 15.2% over 2020; net profit after tax for the first three quarters of 2021 has already exceeded that of the entirety of 2020. Their superb performance in operations have formed the backbone of the stock market’s meteoric rise. More specifically, the semiconductor industry has led the electronics industry in continued revenue and earnings growth since 2020. What’s more, traditional industries such as shipping, plastics, and steel recoup tremendously in 2021 from their negative performance in 2020. The strong recovery of our listed companies across the board is built on the firm and resilient foundations of our domestic industries.

Table 3. Operating revenue and net profit after tax of major industries

Multiple and efficient fundraising channels

Over the past two years, the pandemic has indeed dampened IPOs, but listings have rebounded due to the outstanding performance of our stock market. The year 2021 saw 30 IPOs, the highest number since 2017. Furthermore, with listed companies posting strong earnings and investment driven by demand outstripping supply, it is estimated that domestic private investment increased by 18.9% last year; the highest it has been in the past decade. This has in turn led to fundraising demand, with NT$800 billion raised by listed companies over the past two years, far surpassing the average of NT$400 billion raised annually in the period from 2016 to 2019. With more fundraising channels made available, over NT$600 billion has been raised in each of the last two years through the issuance of bonds, effectively lowering the cost of investment.

Table 4. IPOs and amounts raised

 

Enthusiastic participation in the stock market

Participation by Taiwan’s public in the stock market noticeably ticked up in the last two years as the total number of accounts opened have skyrocketed. In 2021, a total of 770,000 investors opened trading accounts, far more than the annual average of 200,000. The number of individuals with accounts totaled 12.01 million, accounting for more than half of the population. A record-high total of 5.5 million people were engaging in trading this year, a significant jump over the 3 million of the previous year. In particular, participation among those aged 20-30 years has become much more active and has grown by 200,000 people with new opened accounts annually for the past two years. The 20–30-year demographic ratio compared to total investors has grown from 25% in 2016 to a whopping 44%, providing decisive synergy to our domestic stock market.

Table 5. Accounts opened, active traders, and new traders

Lower impact by foreign investors

With our high dividend yield and low price-to-earnings ratio, Taiwan’s securities have always been attractive to long-term foreign investments. In the past years, more capital has flowed in than out, boosting foreign shareholding ratio to a new high of 47% in January 2021. This also means that during major international political and economic upheavals, such as the 2008 financial crisis, the European debt crisis of 2011, and the US-China trade war of 2018, the hedging operations of foreign funds tend to amplify volatility in Taiwan’s stocks. Although foreign institutional investors sold more than NT$1 trillion in net local shares over the past two years, local stocks still advanced by more than 20%. This is partly due to the falling percentage of foreign investors’ net sale value compared to total market capitalization and market capitalization held by foreign investors, at 0.8% and 1.9% respectively, in 2021. The impact by the net foreign fund outflow has also been offset by strong local confidence in the stock market and continued purchases by local investors.

Table 6. Domestic and foreign shareholding in times of net foreign fund outflows


For further information, please contact Mr. Kao at 1219@twse.com.tw.