JPX and TWSE Enhance Regional Cooperation with New Cross-listing Products

With two new ETFs and new futures contracts, investors on both sides benefit from more international exposure and diversified portfolios.

Japan’s leading financial trading bourse, the Japan Exchange Group (JPX), and the main trading venue in Taiwan, the Taiwan Stock Exchange (TWSE), are teaming up to enhance their international product offerings and to increase regional connectivity by cross-listing a number of index products. The move highlights the importance of diversified investment products as investors look beyond single stock instruments.

New ETFs in Taiwan

Firstly, TWSE will increase its current supply of ETFs available to retail and institutional investors with the impending listing of the ‘Fubon TOPIX Leveraged 2X Index ETF’ and the ‘Fubon TOPIX Inverse -1X Index ETF’ on 10 September 2015, both of which will be issued by Fubon Asset Management.

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The two ETFs are the first to track the Japanese stock market, providing investors on the Taiwanese market with an excellent channel to access its East Asian neighbour.  Indeed, the two new ETFs are modeled on the ‘TOPIX Leveraged 2X Index ETF’ and the ‘TOPIX Inverse -1X Index ETF’, which are currently managed by the Tokyo Stock Exchange. Both of these track the Tokyo Stock Price Index (TOPIX), a major indicator used to evaluate overall trends in the Japanese stock market.

ETFs are regarded as useful add-ons to traditional investments as they give investors exposure to a basket of products, thus limiting individual instrument risk. The new products add further variety to Taiwan’s growing ETF landscape.

Indeed, a statement released by JPX notes: “With the listing of new ETFs and ETF trading volumes on the rise in Taiwan, the introduction of the TOPIX leveraged/inverse ETFs will add further momentum to the market, while also expanding international links to Taiwan’s securities market. “

New TAIEX Futures Contracts in Osaka

Secondly, the two exchanges have also agreed that Osaka Exchange (OSE), a subsidiary of JPX and the operator of the largest derivatives market in Japan, will list futures contracts on Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX).

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TAIEX is a stock index calculated according to all common stocks listed on TWSE, and is used as a benchmark for investment in Taiwanese stocks.

TAIEX futures are currently expected to debut on OSE in mid-2016 and will become the first equity index futures tracking the TAIEX index outside of Taiwan.

TAIEX
TAIEX Component Stocks. Source: JPX

The new products enhance cooperation between the two exchanges, building on a Memorandum of Understanding, which was signed in 2000. As such, investors on both sides of the East China Sea can look forward to greater international exposure and a more diversified product range.

Akira Kiyota, Group CEO of JPX, said: “We are very pleased to be looking at the upcoming listing of TOPIX-related ETFs on TWSE and to have concluded the license agreement regarding TAIEX. We look forward to further deepening the ties between the Taiwanese and Japanese capital markets as partners in Asia.”

The sentiment was echoed by Sush-Der Lee, Chairman of TWSE, who said: “TWSE is proactively building alliances with international exchanges …to encourage the Taiwan financial sector to explore new markets in Asia. The cross-listing of financial products with JPX is a significant milestone for closer regional cooperation. Both TWSE and JPX will continue to expand cooperation, particularly in the areas of cross-listing and market promotion.”

In August, JPX set up an International Surveillance Office to monitor cross-border transactions, as the Japanese exchange has seen a surge in orders originating from outside Japan.

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