The Feasibility of Money Market Mutual Funds in Taiwan

• Main Authors: Sun, Kuo-Jung, 孫國榮
• Other Authors: Shean-Bii Chiu
• Format: Others
• Language: zh-TW
• Published: 1997
• Online Access: http://ndltd.ncl.edu.tw/handle/21285047543517216532

碩士 === 國立臺灣大學 === 財務金融學系 === 85 === Equity funds , bond funds , and money market mutual funds are 3 major classes in fund industry. Money market mutual funds currently are not permitted in Taiwan .However , Taiwan's bond funds have been operating like money market mutual funds because of insufficient liquidity in the bond market and the motivation to tax arbitrage . As Taiwan*s goal to be the Asia-Pacific Financial Center , open and sound financial markets are necessary . Legalizing money market mutual funds is one part of them. This article discusses the possibility and impacts of legalizing money market mutual funds.The pros and cons , the regulations , the fund managers' strategies , and basic knowledge that investors should know are discussed in detail. The conclusions are as follows:1. Disclosure: All money market mutual funds should use the same format of prospectus . The information within the prospectus must be clear, comprehensive, and honest. 2. Tax treatment: For fair competition , Repurchase Agreements are better treated as one of money market instruments .3. Resrve Requirement: (1)Money market mutual funds have the " conduit" feature. (2)Investors didn't use money market mutual funds' check features as they did in the ordinary checkable accounts according to turnover rates. (3)The majority of growing assets of money market mutual funds didn't come from deposit institutions. According to the evidences shown above , we suggest that the Central Bank should not impose reserve requirement on money market mutual funds.4. Liquidity: The viability of money market mutual funds is riding on the sufficient liquidity of underlying assets , esp. in bond and bills markets. So the authorities should try to eliminate structural obstacles and establish the credit rating organizations in order to increase the liquidity .