By Kensaku Ihara
Nikkei Staff Writer
TAIPEI (Jan 18) -- Taiwan stood out as an exception to the initial public offering boom that swept global markets last year, as the few promising startups the island produced increasingly opted for mainland debuts.
Just 110 companies went public in Taiwan last year, 20 fewer than in 2016 and the least in nine years. Only 21 listed on Taiwan's main securities market -- four fewer than in 2016. The remainder listed on markets for smaller companies and startups.
This runs counter to global trends last year. The worldwide bull run in stocks led to around 1,700 IPOs, according to research firm Dealogic. That's a 45% jump over 2016 and the most in a decade.
Even in Taiwan, stock market activity was the strongest in 27 years. But a hollowing out of industry on the island, coupled with a lack of startup activity, has crippled the IPO market here.
Though the primary purpose of an IPO is to raise money, going public also helps a company build trust and name recognition in the market where it debuts, laying the groundwork for expansion. Taiwanese contract manufacturing powerhouse Hon Hai Precision Industry, or Foxconn, therefore looks to list group members in mainland China. Media here have noted that a number of Taiwanese companies are waiting for approval to list on the mainland, highlighting the potential for a significant loss of valuable businesses.
In fact, Beijing intends to support Taiwanese companies in listing on the mainland and help them find business opportunities there, China's Zhang Zhijun, chief of Taiwan affairs, said at the end of last year. Encouraging listings, it seems, is a way for Beijing to bring the mainland and Taiwan closer together, in hopes of eventual reunification. While President Tsai Ing-wen's government in Taipei is taking its own steps to nurture startups, it will not be easy to counter the mainland's pull amid concerns about the future of the island's economy.
Hsu Jan-yau, chairman of the Taiwan Stock Exchange, said the decline in IPOs was a temporary phenomenon attributable to investment funds buying up more unlisted companies. But he also said the bourse was seriously considering lowering listing standards to attract more offerings. This could involve loosening requirements on how much profit a company must book ahead of a listing, for example, paving the way for IPOs by biotechnology companies and other startups that take time to turn a profit.
- By Kensaku Ihara, Nikkei Staff Writer
- Nikkei Asian Review
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