Definition
The term Formosa bond refers to an indenture issued in Taiwan, in a non-New Taiwan dollar denomination, by a foreign bank or corporation. Formosa bonds are one of several ways for multinational companies operating in Taiwan to raise capital.
Explanation
Foreign corporations that wish to raise capital in Taiwan have the option of issuing Formosa bonds. These bonds are issued in Taiwan by non-domestic entities, in a non-New Taiwan dollar currency. Formosa bonds are usually issued by the Taiwanese branch of a publicly-traded overseas financial institution or corporation.
Formosa bonds must carry a credit rating of BBB or higher. Trading between securities firms is carried out using the GreTai Securities Market's Electronic Bond Trading System. If the bond is listed on an overseas exchange, they can be traded between dealers using the over-the-counter (OTC) market.
Taiwan's Financial Supervisory Commission held a contest to name this bond. At one time, Taiwan was referred to as Formosa. The name comes from the Portuguese "Ilha Formosa," which means beautiful island.
Related Terms
The term kimchi bond refers to an indenture issued in South Korea, in a non-won denomination, by a foreign bank or corporation. Kimchi bonds are issued to raise dollars for settlement with trade partners in the United States.
Moneyzine EditorJanuary 23rd, 2024- The term Uridashi bond refers to an indenture issued outside of Japan, in a non-yen denomination, and sold to Japanese investors. Uridashi bonds are issued when there is a significant yield differential between the foreign and local currency.Moneyzine EditorSeptember 21st, 2023
- The term shogun bond refers to an indenture issued in Japan, in a non-yen denomination, by a foreign bank or corporation. Shogun bonds are one of several ways for multinational companies operating in Japan to raise capital.Moneyzine EditorSeptember 21st, 2023
- The term shibosai bond refers to an indenture privately placed in Japan, in Japanese yen, by a foreign bank or corporation. Shibosai bonds are issued when a corporation wishes to raise capital from private investors located in Japan.Moneyzine EditorSeptember 21st, 2023
