Inclusion of Taiwan in MSCI list of developed nations unlikely

This article was published by the Taiwan Headlines on March 28, 2006. It reports that according to Henry Fernandez, president of the Morgan Stanley Capital International (MSCI), it is rather unlikely for Taiwan to incorporated into its list of developed nations within the next several years.

In the words of Fernandez: "Unless we are 100 percent sure that the liberalization of Taiwan's financial policies are irreversible, immune from the influence of political factors, it is very difficult for Taiwan to enter the MSCI's list of developed nations."

Fernandez acknowledged the Taiwanese government's efforts in creating a more liberal market. But he also emphasized that in order to attract more foreign investments, much remains to be done, including tax reform, lifting of forex control, and creation of more financial products for arbitrage and risk hedging.

At present, about US$4 trillion of assets worldwide are allocated according to the MSCI's list. Any change made by the MSCI in its list will lead to movement of funds that amount to tens of billions of U.S. dollars.

According to industry analysts, the incorporation of Taiwan into the MSCI's list of developed nations could boost the confidence of foreign companies in their plans to invest in Taiwan. More significantly, as the market in Taiwan opens up, foreign companies are likely to make massive investments in futures, financial derivatives and bonds, which may boost trading volumes and help invigorate Taiwan's markets.

However, industry analysts also caution that the inclusion of Taiwan into the MSCI's list of developed nations will not necessarily induce more foreign capital to invest in Taiwan.