Taiwan's stock exchange, a recent star performer benefiting from the prospect of Chinese investment, is looking to play a more active role in the region and compete with Hong Kong's bourse for listings.

“Hong Kong played a big role [in Asia's capital markets] in the past because cross-strait relations were poor, but now it is all coming back,” Chi Schive, chairman of the Taiwan stock exchange, told the Financial Times. In spite of having a recessionary economy and slumping exports, Taiwan's stock market has been one of Asia's best performers this year with a 40 per cent rise since the beginning of the year.

Breakthroughs in Taiwan's relationship with China earlier this month – including a proposal by China Mobile to buy a 12 per cent stake in Taiwan's Far EasTone – helped drive the benchmark Taiex index up by 15 per cent in the last two weeks.

“The breakthrough in cross-strait relationships has created something of an uproar domestically,” Mr Chi said. “If Taiwan can properly handle the cross-strait relationship, we could have a unique niche in the world economy.”

Mr Chi said Taiwan's former government, under Chen Shui-bian, the independence-minded president, was hostile to Taiwanese businessmen who were engaged in mainland China.

As a result, there are now 65 Taiwanese companies listed on the Hong Kong stock exchange while Taiwan's bourse has no foreign listings.

Mr Chi, who became chairman last August, has aggressively pursued cross-border listings and other ways to attract overseas Taiwan businesses to list on Taiwan's stock exchange.

Thirteen foreign companies are already in talks to list in Taiwan and Mr Chi said he expects about 50 new listings by overseas companies by the end of next year.

Commenting on the recent rally, Mr Chi said that while there are “hidden worries about inflation and whether Taiwan's financial deficit would worsen, these are not immediate dangers, so the overall environment is quite favourable”.