A Formosa bond () is a

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemical ...

issued in

Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the no ...

but denominated in a currency other than the

New Taiwan Dollar The New Taiwan dollar (code: TWD; symbol: NT$, also abbreviated as NT) is the official currency of Taiwan. The New Taiwan dollar has been the currency of Taiwan since 1949, when it replaced the Old Taiwan dollar, at a rate of 40,000 old dol ...

. They are issued by the Taiwan branches of publicly traded overseas financial institutions and to be traded must have a

credit rating A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. ...

of BBB or higher.

History

The major designer and promoter of the Formosa bond was Lee Shyan-yuan, a board member of Taiwan's market regulator, the Financial Supervisory Commission (FSC). The name refers to Formosa, an alternative name for the island of Taiwan; it was chosen as the result of a contest held in September 2006 by the FSC. 15 names were suggested, intended to reflect special characteristics of Taiwan; two different

Chinese-language Chinese (, especially when referring to written Chinese) is a group of languages spoken natively by the ethnic Han Chinese majority and many minority ethnic groups in Greater China. About 1.3 billion people (or approximately 16% of the ...

versions of the name "Formosa bond" were suggested, as well as "C-Wang Bond" and "High-Tech Island Bond". Participants were also invited to suggest their own names for the bonds. The result of the contest was announced on 25 September 2006; "Formosa Bond" was the most popular choice, with 5,776 votes, or 57.16% of the total cast; the second-most popular choice, Taiwan 101 Bond, had only 1,229 votes, and the third-most popular choice, an alternative Chinese translation of "Formosa Bond", garnered only 618 votes.

Trading

Bonds to be traded must have a

of BBB or higher. Trading between securities firms has to be carried out through a subsystem of the GreTai Securities Market's Electronic Bond Trading System, for which trading hours are between 9:00 AM and 1:30 PM. However, Formosa bonds also listed on overseas exchanges may be traded

over-the-counter Over-the-counter (OTC) drugs are medicines sold directly to a consumer without a requirement for a prescription from a healthcare professional, as opposed to prescription drugs, which may be supplied only to consumers possessing a valid prescr ...

between bond dealers. The first Formosa bonds were part of a US$250 million carried out by

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York St ...

in November 2006;

BNP Paribas BNP Paribas is a French international banking group, founded in 2000 from the merger between Banque Nationale de Paris (BNP, "National Bank of Paris") and Paribas, formerly known as the Banque de Paris et des Pays-Bas. The full name of the grou ...

followed with an

Australian dollar The Australian dollar ( sign: $; code: AUD) is the currency of Australia, including its external territories: Christmas Island, Cocos (Keeling) Islands, and Norfolk Island. It is officially used as currency by three independent Pacific Is ...

issuance, initially planned at A$500 million (US$386 million at then-current exchange rates) for February 2007, but later reduced to A$308 million (US$258 million) and delayed until 10 April 2007.

HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tr ...

were also said to be considering issuing such a bond, and

suggested that they might regularly issue Formosa Bonds. Presently, only Taiwan branches of publicly traded overseas financial institutions are permitted to issue Formosa Bonds; the market regulator has floated the idea of extending this permission to other branches and subsidiaries of such institutions as well.

References

{{DEFAULTSORT:Formosa Bond Bonds in foreign currencies Economic history of Taiwan Finance in Taiwan

History

Trading

See also

References