Due to a rise of refinancing needs of local Taiwanese corporates and international bond issuances, the island is predicted to grow new bond volumes by 10%-15%. Specifically, Taiwanese corporations with offshore operations or overseas-based entities will lead the charge for the bond market with many planning to issue bonds denominated in foreign currencies.

 

Just last week Taiwanese corporate, Formosa Plastics made its entrance into the US dollar bond market when it priced a US$1 billion offering.

 

Favourable regulatory conditions were creating a positive environment for the local bond market. The amendment to Taiwan’s Insurance Act last June has enabled local life insurance companies to exclude their investments in international bonds when calculating their maximum permitted total foreign investments. In January 2015 over NT$30 billion equivalent of international bonds were issued in contrast with about NT$75 billion for the entirety of 2014.  

 

Overall, strongest fixed-income growth was from USD-denominated international bonds and Chinese renminbi-denominated bonds, (Formosa Bonds) which grew by over 100% year-on-year from corporations with exposure to Chinese entities.

 

“People are looking for Chinese market growth in the international markets,” says Andrew Tsai an economist at Taipei-based KGI Securities. “We are seeing more renminbi bond issuance in other countries not only Taiwan.”

 

According to the report, international bonds will continue to be an attractive asset class in Taiwan taking away investment flows from other investment instruments. Money market funds in Taiwan decreased to about NT$740 billion in December 2014 from NT$840 billion in May 2014 shortly before the Act was amended.

 

Despite the forecast for significant growth in the coming year, the Taiwanese bond market looks set to diversify its foreign-based issuers by attracting more small Chinese financial companies and banks to tap into the international market. “We expect more from the regulations in the coming year, currently only large government firms in China are allowed to issue bonds in the international market,” Tsai comments.