Cross-Strait Financial Prospects Boosts Foreign Shareholding of Taiwanese FHCs
2012/11/20 | By Judy LiThanks to the currency clearing memorandum that Taiwan and mainland China signed in late August, Taiwanese banks are preparing to handle renminbi (RMB)-based financial transactions when the memorandum becomes effective at the end of the year.
Insiders say that the memorandum paves the way for a cross-strait currency clearing mechanism and will promote financial cooperation between Taiwan and China. F. N. Perng, governor of Taiwan's Central Bank, stresses that the inking of the cross-strait currency settlement agreement is a follow-up to a broader cross-strait financial agreement signed in 2009 and that it marks a milestone in cooperation between monetary authorities on the two sides.
Perng believes that increasing financial exchanges between the two sides will facilitate cross-strait trade and investment, help Taiwan's financial institutions offer RMB-denominated financial products, and allow international banks to participate in developing an offshore RMB settlement center in Taiwan.
Many economies are eager to formalize currency deals with China to take advantage of the trade and investment opportunities available in the huge market there. China is now the world's second-largest economy and has maintained strong growth for more than three decades.
A senior manager at Standard Chartered Bank (Hong Kong) points out that as Taiwan and China further open their financial markets to each other, Taiwan has the potential of becoming the next offshore RMB settlement center.
Seeing this trend, foreign investors have recently laid greater emphasis on Taiwan's financial market and increased their shareholding in Taiwanese banks. Some investors that oversold financial stocks on Taiwan's stock market in the first half of this year have recently started to buy back the stocks, as shown by the new annual highs reached this month in the proportion of shares in seven of Taiwan's financial holding companies (FHCs) that are held by foreign investors.
The seven FHCs seeing highs in ratio of foreign shareholding are E. Sun Financial Holding, First Financial Holding, Taiwan Cooperative Financial Holding, Hua Nan Financial Holding, SinoPac Financial Holding, Jih Sun Financial Holding, and Waterland Financial Holding.
E. Sun, for example, saw the ratio of its shares held by foreign investors rise to 39.82% early this month, up 1.44 percentage points from 38.28% at the end of August.
A senior company official points out that E. Sun scored after-tax profits of NT$5.7 billion (US$190 million) in the first three quarters, much higher than last year's total profits of NT$3.45 billion (US$115 million). This performance has attracted foreign investors to buy its stocks. Over the last two and half months foreign investors have purchased over 89 million E. Sun shares.
Taiwan Cooperative Financial Holding is also favored by foreign investors attracted to its active exploration of the market in China. Taiwan Cooperative Bank, the strong banking arm of Taiwan Cooperative Financial, has already set up a branch in Suzhou, Jiangsu Province, and is applying to set up another in Tianjin, a municipality in northern China. In October foreign investors overbought 9.74 million shares in the holding company.
SinoPac is also ambitiously tapping the market in China and its application to establish a subsidiary there has recently been approved by Taiwan's Financial Supervisory Commission (FSC). SinoPac is now waiting for approval from China's financial authority.
The subsidiary, with capital of US$317 million (about RMB$2 billion), will reportedly be located in Nanjing, Jiangsu Province, and will officially open as soon as China gives its approval.
On the first day of October 35.02% of SinoPac's shares were held by foreign investors, a new high for the year.
Foreign investors have overbought 308,000 Jih Sun shares so far in October, boosting the ratio held by foreigners to a lion's share of 70.53%. (JL, Oct. 2012)
Foreign Shareholding of Seven Taiwanese FHCs in Oct. 2012 | |||
FHC | Highest foreign shareholding (%) of the year | Ratio of foreign shareholding on Oct. 18 (%) | Foreign overselling or overbuying (Million shares) |
E. Sun | 39.82 (Oct. 4) | 39.61 | -20.715 |
First | 19.13 (Oct. 11) | 19.13 | 18.2 |
Taiwan Cooperative | 13.04 (Oct. 18) | 13.04 | 9.74 |
Hua Nan | 19.12 (Oct. 4) | 12.06 | 11.373 |
SinoPac | 35.02 (Oct. 1) | 34.92 | -10.346 |
Jih Sun | 70.53 (Oct. 18) | 70.53 | 0.308 |
Waterland | 14.08 (Oct. 9) | 14.02 | -1.047 |