Why Taiwan’s foreign investment cap should be lifted

Issuance in Formosa bonds has crashed following regulatory changes, but insurers still desperately need higher-yielding products to meet their obligations to policy holders.

Taiwan’s Formosa bond market is experiencing a sharp reversal of fortunes as recent regulatory and interest rate moves make it a far less attractive proposition for the international issuers, which have been attracted to the sector in droves over the past few years.

This spells bad news for the country’s life insurance industry, which has been relying on Formosa bonds domestically listed, foreign-currency denominated bonds to meet its portfolio yield targets ever since such bonds were exempted from life insurers’ 45% cap on offshore investments in 2014.

Here in a two-part article, FinanceAsia looks at the ramifications of a recent...

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