Taiwan Stock Exchange Chairman Lee Shu-te "Hong Junpei Culture and Education Foundation" Public Welfare Lecture

(Taiwan Business News) Taiwan Stock Exchange Chairman and Financial Supervisory Commission Chairman Lee Shu-te recently pointed out that as the Taiwan stock market heads toward 2014, day trading of stocks and day trading of warrants will be introduced one after another this year, which will have a warming effect on the market. Lee Shu-te said today that the gradual adjustment of various regulations will allow the stock market to return to developing on its own according to market forces. In 2014, diverse products will also be put in place step by step, and many products and regulations will gradually "fall into place."

In order to help the public understand the connection between the current operations of the Taiwan Stock Exchange and the market, last Sunday Taiwan Stock Exchange Chairman and Financial Supervisory Commission Chairman Lee Shu-te, at the invitation of Taiwan Business News and the Hong Junpei Culture and Education Foundation, gave a wonderful speech to the audience at the Chiang Kai-shek Memorial Hall. Many in the audience came because of Chairman Lee Shu-te's professionalism, hoping to gain insight into the complex systems of the stock exchange market.

Taiwan Stock Exchange Chairman Lee Shu-te did not take the approach of "revealing hot stocks" or "revealing trends," but instead started from topics such as the stability of Taiwan's capital market, its recent development, and its degree of internationalization, and provided a great deal of objective data. His pragmatic speech was intended to give the public a basis for making their own judgments after gaining sufficient knowledge, so as to prevent them from suffering losses in the stock market by following the crowd.

He stated that the proportion of Taiwan's capital market within the financial market has risen year by year, and the ratio of Taiwan stock market capitalization to GDP is high. Therefore, the capital market is a showcase of the economy. This phenomenon is not only seen in Taiwan; it is also the case in highly internationalized cities.

Taiwan Stock Exchange Chairman Lee Shu-te Public Welfare Lecture: Do Your Homework Before Investing

A sound capital market can serve as a bridge between savers and investors in society and promote economic development. Recently, with the liberalization of the financing and securities industries, the growth rate of direct financing has been far greater than that of indirect financing, making the capital market play an important role in connecting corporate fundraising and private investment and wealth management activities, and the stock exchange plays the intermediary role.

Taiwan Stock Exchange Chairman Lee Shu-te stated that Taiwan has five trading markets, including listed, over-the-counter, emerging stock, creative board, and crowdfunding. There are 1,400 listed companies and more than 700 over-the-counter companies. How to integrate listed and over-the-counter companies and promote the Formosa Index so that it can better represent Taiwan's capital market, and even its proper trading volume, is a question he is considering.

In reality, countries around the world have different financial systems, and it is difficult to summarize them using a relatively unified model. In the structure of the securities market, the stock exchange plays the most demanding role, yet it is the pivot of the entire securities market. Its functions are: creating a continuous trading market, determining fair prices, helping enterprises raise capital, predicting changes in the business cycle, providing complete information, promoting disclosure of financial and business information by listed companies, and protecting the investing public. Lee Shu-te pointed out that exchange rates, interest rates, or prices are all prices of money, and the mutual influence among these three prices makes their impact on the economy even more complex. For example, the central bank uses a low interest rate policy to keep the exchange rate at a relatively low level, in order to lower export prices and increase the competitiveness of Taiwan's products, while at the same time raising import costs, reducing imports, and increasing the trade surplus. However, when import prices rise, domestic prices will more or less be affected and increase. When domestic prices rise, the cost of producing exports will increase, and the advantage brought by the depreciation of the Taiwan dollar will be offset.

Similarly, when domestic interest rates are too low, the returns of those who hold capital decrease. If international interest rates are high, domestic capital will flow outward, which will put upward pressure on domestic interest rates. If the central bank continues to adopt a loose monetary policy, the result may be that the central bank provides funds for investors to use abroad. If the central bank takes no action, then interest rates will rise again, capital will flow back, and the Taiwan dollar exchange rate will also rise again.

In other words, the economy has a natural equilibrium both internally and externally. Artificially using policy to distort or change the equilibrium among the three monetary prices will cause the economy to undertake various adjustments while in a state of imbalance, and in the end a price will still have to be paid. Therefore, a sound market system and the maintenance of market fairness are the only goals of the stock exchange.

Therefore, Taiwan Stock Exchange Chairman Lee Shu-te said that the stock exchange took the lead in launching day trading of stocks and is also striving to introduce day trading of warrants in the first half of the year, and is studying the relaxation of restrictions on the number of securities that can be borrowed. This year's goal is to promote diverse products and give investors more choices, but new products will absolutely not affect the original market.

Hong Junpei Culture and Education Foundation 2014 Public Welfare Lecture