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It is generally accepted that Taiwan is over-banked, with too many institutions creating excessive competition and reducing product prices and overall profits. Structurally this problem needs changing and consolidation is now being viewed as the obvious solution: "New M&A led by state-controlled banks will help the banking sector solve its over-banking problem," says one partner....

It is generally accepted that Taiwan is over-banked, with too many institutions creating excessive competition and reducing product prices and overall profits. Structurally this problem needs changing and consolidation is now being viewed as the obvious solution: "New M&A led by state-controlled banks will help the banking sector solve its over-banking problem," says one partner.

Appropriate consolidation has been proposed and state-controlled banks with higher market shares taking over smaller state banks are a possibility. Mergers led by three major financial holding companies in Taiwan, Cathay Financial Holdings, Chinatrust Financial Holding and Fubon Financial Holding can also help, but as one partner says: "Ultimately it may still require some fundamental changes to the system."

With Southeast Asia opening for more cross-market exchanges and more confidence expected from international investors a growth in capital markets work is expected. The Taiwan stock exchange, with a total market capitalization of $800 billion, aims to have 55 IPOs and Taiwan Depositary Receipts (TDR) issuances this year. "Taiwan's strength is in technology, manufacturing and food products", says a partner, and "these are the areas that companies will be listing in".

With the signing of a major trade pact with China, Taiwan's capital markets has become more competitive, with many overseas Taiwanese investors studying the possibility of listing on the domestic stock exchange. "International investors pay attention to Taiwan's capital markets because of the production to major high-tech companies," says another partner. These include companies such as Taiwan Semiconductor Manufacturing and United Microelectronics, the world's two largest chipmakers.

With the collaboration of investment banks, the Taiwan Stock Exchange has also held a number of events around the world in an attempt to drum up interest. One boost to the Exchange's reputation has been the listing of US-based integrated circuit designer Integrated Logic Memory on the main board, making it the only foreign company to have a primary listing in Taiwan. With the cross trait regulatory passed, China-based TPK Holdings, a touch panel provider, has also gone through the preliminary review and is waiting for a primary listing on the main board.