Enthusiastic Reception Sparks Rush to TDR Issuance

Encouraged by enthusiastic market response this year, many Taiwanese-invested firms operating abroad, especially those in China, plan to return to the island and issue Taiwan depository receipts (TDRs). This will help boost the Taiwan Stock Exchange (TSE) along its way to becoming a regional assets management center.

The number of TDRs listed on the local bourse has reached eight, double the number of last year and ahead of the six DRs listed in Singapore, the only other Asian market to list them (in so-called "secondary listings").

Chi Schive, chairman of the TSE, reveals that another six TDRs will be listed on the local stock exchange by year-end and predicts 20 more listings next year, bringing the total number to 34.

Schive attributes the mania for TDRs to the warm reception afforded this year's first TDR, issued by Want Want China, adding that besides Taiwanese-invested firms in China, a number of foreign enterprises, including two from Thailand, one from Singapore, and some from Hong Kong, also plan to issue TDRs.

Schive also reports that the regulator has agreed to allow TDR issuers to apply for an aggregate amount of TDRs to be issued in several batches, instead of having to seek separate approval for each issuance. This arrangement is expected to greatly accelerate the screening process for TDR issuance and expand the supply of TDRs on the market.

Want Want China, a Hong Kong-listed foodstuff firm, triggered the current TDR rush by issuing its TDRs in late April; at the time of issuance it received buy orders for 350,000 units, 167% of the total amount, jacking up the price by the daily limit of 7% during the trading session. This scenario was played out repeatedly for the three subsequent TDR issuances, by Ju Teng, a 3C manufacturer; Yorkey Optical, an optical-parts manufacturer; and Autolife, an auto repair and maintenance chain, all Taiwanese-invested firms in China with shares listed in Hong Kong. Except for the new TDRs listed by Autolife on Oct. 12, these issuances all chalked up huge premiums, ranging from 10% to 70%, over their prices in Hong Kong.

This remarkable performance has attracted the attention of many other Taiwanese-invested firms with shares listed in Hong Kong, Singapore, or even NASDAQ, many of which have suffered lackluster share-price performance on those markets.

Incentives offered by the government have further whetted the interest of overseas Taiwanese-invested firms in returning and raising funds on the island. They include permission for overseas Taiwanese-invested holding companies to remit the entire amount of the funds raised in Taiwan to China for investment there, exemption from the half-year waiting period for the listing of TDRs by Taiwanese-invested firms whose shares are already listed on foreign bourses, and a lower threshold for listing by Taiwanese-invested high-tech firms.