Chairman Wu Cheng-ching of the Bills Finance Association gives a "Hong Chun-pei Cultural and Educational Foundation" public-interest lecture

(Taiwan Business News) In recent years, books on financial management and investment have been popular in major bookstores, and the videos and books of some successful people have also gone viral, all pointing to one thing: the difference between the rich and the poor is not the salary gap, but how they use and view every single dollar. On March 9, the Hong Chun-pei Cultural and Educational Foundation invited Chairman Wu Cheng-ching of the Bills Finance Association to speak on "Bills Finance, Innovation and Breakthroughs." Drawing on his many years of experience in financial and bills business management and in serving the industry, Chairman Wu shared his experience, giving the public a brand-new perspective.

Financial markets can be divided into the capital market, the money market and the foreign exchange market. The capital market is a market for the supply and demand of long-term funds of more than one year (for example, the market for the issuance and trading of long-term credit instruments such as the stock market and the bond market). The money market, by contrast, regulates the supply and demand of short-term funds and is a market that uses short-term credit instruments to channel funds, with terms of within one year. The money market is in effect a short-term lending market, mainly comprising the short-term bills market and the interbank lending market. The money market operates openly, allowing both supply and demand sides to conduct lending and borrowing directly with a full understanding of the market. Participants in this market include individuals, enterprises, banks and the government, any of whom may be suppliers or users of funds.

Wu Cheng-ching pointed out that the evolution of Taiwan's money market is inextricably linked to Taiwan's economic growth process; and that the requirements for establishing a money market are sufficient and sound short-term credit instruments and sound intermediary institutions. In the 1960s and 1970s in Taiwan, small and medium-sized enterprises flourished, and so bills finance emerged as the times required.

A bills finance company, also known as a short-term bills dealer, refers to one that operates short-term (with financing terms of within one year) bill trading business within the money market. In other words, a bills finance company provides the industrial, commercial and business circles and individuals with another source of financing funds besides banks. The basic function of a bills finance company is to pool and deploy short-term funds within the money market as an intermediary between savers and investors, so that lenders with surplus short-term funds and borrowers lacking short-term funds can, through transactions in the bills (money) market, satisfy each other's desires. The trading instruments exclusive to bills dealers are: treasury bills, negotiable bank certificates of deposit, drafts (bankers' acceptances, commercial acceptances) and commercial promissory notes.

Treasury bills are short-term debt securities of less than one year issued by the government to regulate treasury receipts and expenditures and stabilize finance. They are issued by tender; the issue amount, face value and term are set by the Ministry of Finance in consultation with the central bank in light of actual conditions at the time of issue. They are usually sold by open competitive bidding at a single interest rate, redeemed at face value at maturity, and typically issued in multiples of a 91-day base, namely 91-day, 182-day, 273-day and 364-day terms.

A bankers' acceptance is a time draft in a commercial transaction in which the buyer or seller entrusts a bank as the drawee and the draft is accepted by the bank. Once a draft is accepted by a bank, the debtor of the instrument is the accepting bank, so the risk is relatively low, making it a sound trading instrument in the money market. It falls into two categories: (1) bankers' acceptances created on the basis of domestic usance letters of credit; (2) bankers' acceptances created by a bank directly granting a customer a draft acceptance line. A commercial acceptance, by contrast, refers to a draft in a commercial transaction in which the seller, in order to collect payment, issues after delivery a draft designating the buyer as drawee; once the buyer accepts it, the seller, when in need of funds, may take the draft to the money market for discounting.

A negotiable bank certificate of deposit is a deposit certificate issued by a bank that pays interest at an agreed rate for a specified period, ranging from one month to one year, in either registered or bearer form; the certificate may be held to maturity or transferred and sold in the money market before maturity. In addition, to regulate market funds, the central bank also issues negotiable certificates of deposit, but subscribers to the central bank's negotiable certificates of deposit are limited to financial institutions.

Wu Cheng-ching said that the part of the bills market related to the general public is the secondary "circulation market." The advantages of investing in bills are: 1. Individual interest income is subject to a separate 10% tax, while corporate interest income is incorporated into profit-seeking enterprise income tax; 2. It offers the interest of a time deposit with the convenience of a demand deposit; 3. Flexible deployment of funds.

Since financial management is a necessity for modern people, Wu Cheng-ching concluded with several investment suggestions: take protective measures, clarify investment goals, save on taxes as much as possible, strive to ensure cash returns keep pace with inflation, start investing with one's own home, commercial real estate has investment value, try to understand financial products other than stocks, set stop-loss points for financial product investments, be cautious when investing in gold and collectibles, and diversify investments. He believes that decisions made in accordance with these broad principles are relatively safe.

Regarding how people today invest in stocks, Wu Cheng-ching also put forward five principles: 1. Before entering the market, first set stop-loss and profit targets; the stop-loss should be based on market information rather than one's own financial situation; if one's finances cannot bear the stop-loss amount, one should give up the trade.

2. A good company and a good stock are two different things: when investors enter the market, they always fall into the confusion of fundamentals; in fact, when a good company's stock price is overvalued, it becomes a bad stock. When a bad company's stock price is undervalued, it becomes a good stock. 3. One should befriend the trend: when a stock rises or falls for a period, usually the momentum of that stock also increases, meaning the probability of the current trend continuing is far higher than the probability of a reversal; buy stocks whose trend is upward and sell stocks whose trend is downward.

4. A low stock price is not as good as good timing: many investors tend to enter the market when a stock opens with a gap down, always thinking that in this way they can get a good price, unaware that a stock opening with a gap down always has some reason unknown to others. And stocks that open with a gap down often also keep falling. 5. Never add to a position to average down; adding to a position to average down a loss is by no means planned in advance, and a stock price that keeps falling must have its reasons.

Profile of Wu Cheng-ching, Chairman of the Bills Finance Association

Chairman Wu Cheng-ching holds a bachelor's degree from the Department of Banking of National Chengchi University and a master's degree from the Graduate Institute of Finance of National Taiwan University (EMBA); he has served as a team leader at the Taipei branch of Bank of America, assistant vice president and concurrently trading department manager of International Bills Finance Corporation, president of Fubon Bills Finance Corporation, president and concurrently chairman of Fubon Bills Finance Corporation, general manager of the Financial Markets Business Group of Fubon Financial Holding, executive vice president of Taipei Fubon Bank, and president of China Bills Finance Corporation, among other positions; he currently serves as chairman of China Bills Finance Corporation, chairman of the Bills Finance Association of the Republic of China, director of the Taiwan Academy of Banking and Finance, director of the Taiwan Financial Services Roundtable, director of the Chinese National Association of Industry and Commerce, director of the General Chamber of Commerce of the Republic of China, and independent director of Mao Co., Ltd., among other positions.

Hong Chun-pei Cultural and Educational Foundation 2014 public-interest lecture