Market and sales overview
(I) Market analysis
1. Locations where products (services) are mainly sold (provided)
The Company currently targets at the sale (provision) of its primary products (services) in Taiwan, while overseas markets serve as secondary targets.
2. Market share
Market share and ranking of the company’s main business activities in 105 are as follows:
3. Future market supply, demand and growth
Taiwan's GDP growth is estimated at 1.75% for 2017, which is higher than the 1.10% of 2016. However, as interest rate rises in the United States and other central banks starting to tighten money supply, the U.S. dollar may strengthen to a point that causes foreign investors to flee. In addition, the government has changed the estate tax to a 3-tier progressive system in an attempt to source funding for long-term nursing program, which is believed to have a negative impact on market performance.
In 2017, the government will be commencing support to its seven industrial projects (namely: biomedicine, green energy, smart machinery, defense aviation, Asian Silicon Valley, agricultural biotech, and high-value materials) and taking initiative to develop relationship with ASEAN and South Asian countries as part of its southbound expansion policy, and thereby reduce dependency on China. Furthermore, in an attempt to boost stock market trade volume, Taiwan Stock Exchange Corporation is currently exploring the possibility of reducing trade lots from 1,000 shares to 100 shares, and extending trade hours. These policies may bring positive growth incentives to the market.
4. Competitive advantage
(1) The Company leads industry peers in terms of financial health.
(2) Excellent branch efficiency.
(3) Consistent earnings from the brokerage segment.
(4) The underwriting segment has built up positive reputation overseas.
(5) In the derivatives segment, the Company has been efficient in the sale of options and hedging instruments.
5. Opportunities, threats and responsive measures.
A. Policy-wise: the Financial Supervisory Commission recognizes the potential of financial technologies in reshaping the future of the financial industry. For this reason, it has proposed the "Financial Technology Development Program" to achieve the following goals:
(1) Support the development of crowdfunding platform.
(2) Create an online fund sales platform with intelligent investment services.
(3) Stimulate training of financial technology talents by the financial industry.
(4) Develop an operating environment for digital book-entry transfer.
(5) Research applications of distributed ledger technology.
(6) Create a financial security information sharing and analysis center.
(7) Establish an identification service center. While financial technology enables financial institutions to expand the scope of service, it also allows technology companies to compete in the financial business; either way, both the financial and technology industries must interact and learn from each other in order to grow. The Financial Supervisory Commission has made several deregulations in recent years to connect the local market with the rest of the world, including: OSU service, investment of Red Chips in Hong Kong stock market, investment of Chinese and Japanese stock markets, trading of oil and leveraged ETF, and allowing Chinese companies and individuals to invest in domestically issued mutual funds and foreign currency bonds. Taiwan Futures Exchange also expects to complete its after-hour trading platform and policies by 2017.
B. Market-wise: increase of corporate profitability serves as an incentive for investors to trade. Taiwan Futures Exchange plans to complete its after-hour trading platform and policies by mid-2017, thereby giving investors more opportunities to trade and hedge, while enabling Taiwan's futures market to compete with the rest of the world. Deregulations such as OSU service, investment of Red Chips in Hong Kong stock market, investment of Chinese and Japanese stock markets, trading of oil and leveraged ETF etc will give proprietary traders and investors more variety of instruments to choose from and more flexible investment choices. Furthermore, the Financial Supervisory Commission is relaxing the criteria for issuance of international bonds and broadening the range of instruments investors may trade in order to satisfy the market's needs for diverse investment opportunities. An international bond liquidity provider system is being developed to create trade opportunities from which participants may profit.
A. Policy-wise: the government's decision to raise estate tax by introducing a 3-tier system may cause capital to flee. The authority's plan to shorten deal-matching time in the stock market would require securities firms to invest significantly in new hardware. The authority's goal to increase online securities trading to 70% of total volume by 2020 may promote online transactions at the expense of commission revenue, and force sales representatives to transform into other roles.
B. Market-wise: the rise of USD interest rate may cause capital to flee overseas. UK's exit and upcoming elections in France and Germany may pose concerns to the future of European Union, while issues such as immigrants, political instability and non-performing loans of banks will continue to undermine market performance. After three failed attempts, China A-shares are very likely to be included in MSCI Emerging Markets Index, and attract investment capital from Taiwan's stock market. Trump's victory in the presidential election signifies USA's departure from the Trans-Pacific Partnership (TPP); the remaining TPP participants may turn to China's Regional Comprehensive Economic Partnership (RCEP) instead, and given lack of progress in cross-strait relations, Taiwan may be excluded from RCEP and suffer adverse economic consequences.
(II) Main product purpose and production process: Not applicable.
(III) Supply of key raw materials: Not applicable.
(IV) Name of trade partner representing more than 10% of total purchases (sales) in any of the previous two years, and the amount and percentage of purchase (sale). Describe the cause of any variation. Codenames can be used instead if contract prohibits the company from disclosing customers' names, or if the counterparty is a non-related natural person: None.
(V) Production volume and value in the last two years: Not applicable.
(VI) Sales volume and value in the last two years: Not applicable.