My first visit to Taiwan was in 2004 after Standard Chartered, which I was working for, bought Bank of Hsinchu, located in an area known for its tech industry. The local bank employees, careful to avoid speaking in Mandarin, grumbled among themselves in Hokkien and Hakka, the two common local dialects. I was barely conversational with my ACS (Anglo-Chinese School) Mandarin, but with a Hokkien father and a Hakka mother, I told my new colleagues a day later that I could understand their laments and that they should feel free to bring them up. Instead of staying clear of me, I was warmly welcomed by them after that.
Ties between Taiwan and Singapore go way back. Besides the “Mexicans” from Israel, Taiwan has helped train our army boys, too. Thousands of our soldiers visit Taiwan regularly to make good use of the expansive yet mountainous terrain to train and have a bit of R&R on the side, boosting the local economy whenever a new battalion is in town.
As fellow Asian Tigers, or two of the four Little Dragons, Singapore and Taiwan have enjoyed years of cooperation in trade and mutual respect. Taiwanese laud our efficiency, while Singaporeans acknowledge their entrepreneurial drive.
Personally, I am a fan of Taiwanese culture, enamoured by the works of so-called “second new wave” directors such as Stan Lai, whose Secret Love for the Peach Blossom Spring is an award-winning tragic-comedy involving two groups of actors rehearsing different plays on the same stage. It was a masterful juxtaposition carrying the depth of the original play’s political and psychological meanings, which is still poignant and relevant to today’s complex cross-strait dynamics. There was also Lee Ang, whose masterpieces Wedding Banquet and Eat Drink Man Woman explored sensitive themes, while Crouching Tiger Hidden Dragon revived the wuxia genre. I am a fan of Taiwanese pop music, too, and I listen to Jay Chou, Elva Hsiao and, of course, the late Teresa Teng.
In my subsequent years at the Singapore Exchange (SGX), I established deep ties with stakeholders of the Taiwan market ecosystem, thanks to the support of government agencies and my improved Mandarin (including some singing). Those ties were put to a big test in 2020.
Lust, Caution
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From 1995 to 2020, SGX provided risk management with an open and international platform for trading MSCI Taiwan futures. To capture a bigger slice of the market, the Hong Kong Exchanges and Clearing (HKEX) paid hundreds of millions to index creator MSCI to shift their licensing away from Singapore, potentially taking away billions of dollars of daily futures trading liquidity.
Away from public eyes, SGX sprung into action. It swung almost the entire offshore Taiwan futures trading market from MSCI Taiwan to the FTSE Taiwan benchmark, which had only a tiny fraction of assets that global institutional investors referenced in six markets. Taiwanese regulators, lobbied by local stakeholders ranging from brokers to chairmen of various financial groups, approved our replacement product in record time. As such, Singapore remained a friendly offshore hub for Taiwan to draw in more capital through an international standards risk management facility while creating more liquidity onshore in the Taiwan Futures Exchange through arbitrage trading by customers. HKEX paid a huge price for the more recognisable benchmark by equity investors, but with innovation, preparedness, relationships and well-established trust, the market and business stayed with SGX.
A Brighter Summer Day
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Thus, it was incredibly nostalgic when I represented the SGListCos — our local association for listed companies — on my last overseas trip of this year to speak at the Taiwan Investor Relations Conference organised by the Taiwan Investor Relations Institute (TIRI). I reminisced with old friends about the days we went through thick and thin and secured hard-fought wins.
In true Taiwanese fashion, Jonny Kuo, chairman of TIRI, made me get up and sing a duet at the awards dinner. Fortunately, we picked the simplest Teresa Teng song, which I had some practice with former colleagues before I retired. Teng’s sweet melodies were far more straightforward than those performed by Jay Chou for the 40,000 delirious fans who flocked to the Taipei Dome for his “homecoming” concert — the first in seven years. It was a sight to behold, even when I was seated right at the back watching him perform for 3.5 hours.
I was also at Chou’s recent concert in Singapore in October. This time, I was fortunate to be in the first row as the organisers donated seats to help Community Chest raise $500,000. Those familiar with our markets will recognise that Chou’s concert is part of GHY Culture & Media Holding ’s business, listed here in December 2020.
On my latest trip, I made it a point to visit the Taiwan Stock Museum, located at the old Taiwan Depository & Clearing Corporation (TDCC) vault. The well-curated exhibit features scrips of Taiwan stocks that reflect how Taiwan’s economy has developed from agricultural industries in the 60s and 70s to sporting goods, and then the PC era of the 80s and 90s with companies such as Acer holding court. The museum’s centrepiece was the first share certificate of Taiwan Semiconductor Manufacturing Co (TSMC), which accounts for more than a third of Taiwan’s entire stock market capitalisation.
Our Times
When President Ma Ying-jeou of the Kuomintang took over from Chen Shui-bian of the Democratic Progressive Party (DPP) in 2008, Taiwan’s already flourishing economy entered a new spring. Under Ma, cross-strait relations warmed and culminated in a historic meeting between Ma and Xi Jinping in 2015. The flood of visitors from the mainland gave Taiwan’s economy a new boost. Around the iconic Taipei 101, which opened in 2004 when Ma was Taipei’s mayor, gentrification and development took place across the city with new hotels like The Okura Prestige, W, Hanns House and Humble House.
Inward investment flow increased as well. Already costly central Taipei properties surged further, pricing most white collars out of this market — except the throngs of highly-paid Taiwanese, armed with postgraduate degrees earned in the US, dotting the ranks of JP Morgan, Macquarie or Bain and McKinsey. Plenty of M&As involving foreign capital also took place, with the likes of Ta Chong Bank attracting money from Carlyle and numerous other deals.
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However, Taiwan’s economy lost some of its lustre under DPP’s Tsai Ing-wen in 2016 and Donald Trump’s boisterous first stint in the White House. Many wealth managers and investment bankers were covering Taiwan out of Hong Kong for a while. However, they found it increasingly inconvenient, and many pulled back after setting up onshore for some time. At the same time, the very successful white-collar, Taiwanese moved back to Taipei or went to the US. The youth who stayed make do in small businesses or online ones.
I have always wondered if the description of them as “strawberries”, which is what the older generation calls them for their lack of competitiveness and resilience, was apt. Has present Taiwanese society — keen on cheap and good healthcare and ahead of the curve in environment-focused business — found another path? This alternative is well and good if public finances can afford it, but not if the economy runs out of domestic steam as it has sputtered after “green” DPP administrations tried to redefine the One China geopolitical boundaries.
An earlier generation of Taiwanese entrepreneurs, the likes of Terry Gou of Foxconn and Stan Shih of Acer, were very competitive. Their companies were so successful in operating out of China that StanChart, Citibank and HSBC hired Taiwanese relationship managers in Shanghai to service them. Today, their wealth is more diversified. As correctly observed by the TIRI director, many family offices have set up shop in Singapore, including those in Taiwan. Many are still looking to venture out of a slow, mature and domestic economy, which is expensive for consumers, to invest if they have the cash or to raise capital if they do not.
You are the Apple of My Eye
The MSCI Taiwan is up some 19% since the start of the year and Taiwan has many more listed companies than Singapore. Therefore, it is not wrong to ask if there is a need to venture overseas if domestic capital markets are sufficient. Taiwan’s indices are dominated by TSMC, up 80% since the start of the year, thanks to artificial intelligence (AI). The speculative nature of the country’s retail investors also provide market liquidity (often at their own loss and cost), resulting in the Taiwan Stock Exchange Weighted Index (TWSE) having multiple times the daily turnover of Singapore’s. Taiwan too has the highest turnover among mutual funds holdings by retail investors as wealth managers and relationship managers help their clients “actively rebalance”.
But there are less developed bond markets and other financing instruments, and the New Taiwan Dollar — its local currency — is not freely convertible with all sorts of forex controls and limitations. There are limitations to what domestic insurance and pension funds can access and fund locally to deliver their pension obligations, so some of their capital should look overseas. Still, it is constrained by restrictions and caps. Singapore should be a logical venue as there is both stability and opportunity to deploy and diversify in our deep multi-trillion Asian bond markets, or REITs and trust-based instruments.
Likewise, a Taiwanese business looking to internationalise can look to the US, much like Singapore’s. They don’t have to be as large as TSMC but need several billion dollars in market cap to get noticed, too. Want Want Holdings, a foodstuff giant founded in Taiwan, was once listed in Singapore. Today, we are left with the sole de-spac 17Live, pay TV operator Asian Pay Television Trust and venture capital firm Hotung Investment Holdings , which has delivered decent returns since its 1997 IPO.
Perhaps as we take steps to reinvigorate our capital markets in Singapore this coming year, much like how Taiwanese businesses and families are already set up here (and allegedly buying up blocks of new condos), it may be time for some alternative fundraising options for their international subsidiaries here. With their creative and green industries of global promise, Singapore’s Catalist can be home to more than just Winking Studios, the most recent listing here with Taiwan origins.
We do not know what the new Xi-Trump world will be like, with Tigers and Dragons hidden in plain sight. But it would be good to bring our friendship to the next level with deeper and broader business and trade integration in a new era of friend-shoring, bringing together our capital markets as there is much benefit for both.
Chew Sutat retired from Singapore Exchange Stock Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
