Q+A-What to expect from China-Taiwan financial talks
TAIPEI, April 24 (Reuters) - Political rivals Taiwan and China will sign agreements on Sunday allowing their banks and other financial institutions to invest in each other's markets.
The deals will be signed in the Chinese city of Nanjing.
Taiwan's stock market has risen 28 percent this year, the world's second best performer, largely due to hopes for improved ties with China.
Since China-friendly Taiwan President Ma Ying-jeou took office a year ago, he has eased tensions with Beijing. Following is what to expect from the agreements:
WHAT CAN TAIWAN BANKS EXPECT?
China will treat Taiwan banks at least as well as it treats other foreign banks and maybe better.
Foreign banks must do business in China for at least five years -- at least two of them profitably -- before they can deal in China's local currency, the yuan. Sunday's agreements could waive some or all of those requirements for Taiwan banks.
Negotiators from China and Taiwan will also work out a currency clearing system between the Taiwan dollar and Chinese yuan and discuss mutual access to information about each other's markets, including securities and futures.
DO THE LATEST NEGOTIATIONS INCLUDE OTHER AGREEMENTS?
China and Taiwan will sign a deal allowing the first scheduled direct flights between the two sides, which once banned air links. Scheduled flights would replace charters, easing passage for 750,000 Taiwanese who do business in China and for Chinese tourists in Taiwan.
The agreement will cover new routes, shorter routes and additional airports on both sides.
Chinese officials have also said the two sides can begin to talk about the eventual signing of a free trade agreement.
A phased agreement letting Chinese firms invest in Taiwan infrastructure projects is on the agenda, as is a new system for cross-border crime fighting.
WHAT IMPACT WILL THE DEALS HAVE ON TAIWAN MARKETS?
If Taiwan's banks get a good deal they can expect an influx of foreign funds, boosting the Taiwan Stock Exchange's banking and insurance sub-index .TFNI.
The island's tourism subindex .THOI could see a strong boost next week on the flight deal. The sub-index began climbing this week as Taiwan raised the daily quota for Chinese tourists.
While financial and tourism shares should rally, analysts emphasise that meaningful financial rewards -- especially in the banking sector -- could take 12 to 18 months materialise.
WHICH COMPANIES ARE MOST LIKELY TO GAIN?
Taiwan institutions such as Fubon Financial (2881.TW), Cathay Financial (2882.TW) and Chinatrust Financial (2891.TW) stand to gain as they have representative offices in China and could use the new accord to expand their business.
Major airlines, such as Taiwan's China Airlines (2610.TW) and Chinese counterparts such as Air China (0753.HK) and China Eastern (0670.HK), are expected to apply for any new air routes.
If talks progress on a free trade agreement, which could be signed later this year, traders and manufacturers on both sides could benefit from lower tariffs.
WHAT OTHER STEPS ARE NECESSARY TO OPEN MARKETS FURTHER?
Taiwan banks want China to relax rules on how many branches they can open and to let them lend money in Chinese yuan, competing with local peers.
The two sides must also work out rules for Chinese banks that seek to do business in Taiwan and refine guidelines on Chinese investment in Taiwan by defining which industries are acceptable versus those which are politically sensitive.
