Taiwan and Abu Dhabi exchanges to launch ETFs

The Taiwan Stock Exchange Corporation (TSEC) is to develop exchange-traded funds (ETFs) with the Abu Dhabi Securities Market (ADSM), to be traded on both exchanges, the chairman of TSEC said on Thursday.

The two exchanges signed a memorandum of cooperation on Wednesday to strengthen ties and work together in new areas.

Dr Rong-I Wu, chairman of TSEC, said at a press conference in Dubai: "We agreed to study the ETF product for dual listing, especially for Islamic funds."

Dr Rong-I said the ETF products would be based on listed stocks either from the ADSM, the Taiwan Stock Exchange, or a mixture of stocks from the two, and could be launched as early as March 2008.

"ETFs are popular everywhere, especially in the US and Europe," he said. "It's good for people who don't know about the individual stocks and companies.

"The risk and fluctuation is smaller, that's why they're popular."

Dr Rong-I suggested that the first ETFs would probably be based on either stocks of technology companies or Shariah compliant stocks, although he said there was not yet a substantial appetite for Islamic finance in Taiwan.

"In Taiwan, the interest is in if there's a high return or not - we don't have a big Islamic population," he said.

ADSM has previously announced that it was looking to develop a framework to trade ETFs on its exchange.

The agreement between the two exchanges also opens the possibility of dual listing of companies in Taiwan and Abu Dhabi, which Dr Rong-I said could happen by the middle of 2008 if the exchanges were able to resolve legal and regulatory issues.

This is the first memorandum of cooperation that TSEC has signed with a Middle East exchange, although it also held talks with Dubai International Financial Exchange (DIFX) this week and says it has other agreements in the pipeline.