* After MSCI adds China shares, Taiwan stocks need to be "bigger and better"
* Encourages Nan Shan Life, Shanghai Commercial to list
* Could launch indices with Korea Exchange as soon as July
* Estimated T$11.98 bln to be pulled from Taiwan shares -regulator (Adds more details)
By Roger Tung
TAIPEI, June 21 (Reuters) - Taiwan will encourage more of its financial firms to list locally and create new products with its South Korean counterpart to curb pressure from possible outflows to China after mainland shares were added to a key global benchmark, the head of the island's bourse said on Wednesday.
Taiwan Stock Exchange Corp President Lee Chi-hsien told Reuters in a phone interview that Taiwanese financial firms, including Shanghai Commercial & Savings Bank Ltd and Nan Shan Life Insurance Co Ltd, will be encouraged to list on the main index.
"We must rely on ourselves and make Taiwan stocks bigger and better," Lee said.
His comments came after U.S. index provider MSCI said it would add some of China's so-called "A" shares to its Emerging Markets Index for the first time, giving China a win in its long campaign for inclusion in a leading emerging markets benchmark, in what was seen as a milestone for global investing.
A spokesman for Shanghai Commercial, which trades on the local over-the-counter market, said it had no current plans to list on the main bourse, a move which could boost its profile with investors.
Changes in Nan Shan Life's management in recent years has made public listing still a ways off due to regulatory requirements on its main shareholders. Nan Shan Life was not immediately available for comment
Lee said the bourse and the Korea Exchange could as soon as July or August jointly launch indexes comprised of Taiwanese and South Korean technology firms, and companies that offer high dividends to attract more investors to the two exchanges.
The two exchanges signed a memorandum of understanding in December 2015 on expanding their exchange traded fund markets and creating new indexes.
Lee said that in the short term, MSCI's move would have a limited impact on the Taiwan main index but its effect over the longer term should not be underestimated.
Passive funds investing in MSCI's Emerging Market Index may reduce their holdings in Taiwan shares by T$11.98 billion ($392.97 million), accounting for 0.09 percent of foreign investor holding in Taiwan shares by market capitalization, according to the island's Financial Supervisory Commission.
Taiwan's technology subindex is the biggest and most heavily-weighted sector, at around 48 percent, in the main index, followed by the financial subindex, around 14 percent.
This year so far, there have been nine initial public offerings on the main bourse, compared to 25 last year and 24 in 2015, based on exchange data.
The main index closed up 0.2 percent on Wednesday, after touching fresh 17-year highs during the session. ($1 = 30.4860 Taiwan dollars) (Additional reporting by Emily Chan; Writing by J.R. Wu; Editing by Shri Navaratnam and Kim Coghill)